Despite 25 consecutive monthly (y-o-y) increases, preliminary estimates for October indicate a 41.3% y-o-y rise.
“We believe AEM is in a strategic position to benefit from its key customer and industry uptrend, and could re-rate higher,” they write in a Nov 25 report.
They also point out that Intel, AEM’s key customer, believes that the semiconductor industry could double its market size to US$1 trillion by 2030.
Intel is ready to commit significant investments to ensure that it is at the forefront, and the analysts believe that this will translate into higher revenues for AEM in FY2022-2023.
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Furthermore, Ling and Chung believe there is a near-term key catalyst for the company – an expected ramp-up of the next generation of handlers to its Intel.
“In the semiconductor industry, investments in the back-end typically lag the front-end by several quarters. After procuring front-end equipment, AEM’s key customer has begun to ramp up its next generation of test handlers and we believe that this will be one of the key drivers of AEM’s growth in FY22F”
Th analysts say that they lift their FY2022F P/E peg for AEM to 15.0 times and increase their FY2022 earnings forecast by 11%. “Our higher P/E peg is at a 12% discount to peers,” they say.
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They acknowledge that they are “more optimistic” on revenue and earnings growth, and warn that some risks include single-customer concentration risk, geopolitical events, protraction of the Covid-19 pandemic, and foreign exchange risk.
Shares of AEM were trading at $5.02 as at 3.56pm, with a FY2021 price to book ratio of 4.0 and dividend yield of 1.4%.
Photo credit: Samuel Isaac Chua/The Edge Singapore
