The pair write in their July 24 report: “Given its technological superiority, we believe AEM is well positioned to ride on the growing SLT market that has benefitted from the increased complexity of chips and higher test coverage requirements, alongside the need for advanced heterogeneous packaging.”
Overall, Tan and Ling see that the semiconductor industry is well-poised for growth, led by the push towards digitalisation.
They note that global consulting firm, McKinsey, projects the industry to become a trillion-dollar industry by 2030.
Tan and Ling see industry megatrends such as artificial intelligence (AI), 5G and Internet of Things (IoT) to pave the way for growth in test spend, due to higher test volumes and test times.
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“Longer test times would also increase the requirement for AEM’s consumables due to wear and tear,” write the analysts.
In the past few years, AEM has announced several customer wins. Notably, the group’s asynchronous modular parallel smart (AMPS-BI) product won an additional project to test next-generation data centre devices in the 4QFY2024.
Its PiXL thermal management solution has also been deployed for AI customers, while AEM also expanded its installed base for its memory customers to test the GDDR6 device.
Tan and Ling write: “We believe that AEM is near an inflection point and foresee its customer diversification strategy yielding more significant returns in the years ahead.”
The analysts’ target price is based on 25 times blended FY2026 earnings versus the previous peg of 20 times on FY2025/2026 earnings.
Key risks noted by them include a lower ramp-up of new customers and key customer weakness.
On July 27, AEM announced in a SGX filing that chief executive officer (CEO), Amy Leong, had resigned after serving little over a year in her role, because of "board-led leadership realignment for growth."
Same Kabbani, president and chief technology officer of the group, has since taken over the role with effect from July 28.
Leong took over from previous CEO Chandran Nair, who served as the CEO between July 2020 and June 2024.
“Today marks my last day as CEO of AEM in Singapore, as I transition into an advisor role back to the US. It’s been a privilege to help shape AEM’s journey,” writes Leong in a LinkedIn post on July 28.
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In June this year, Leong told The Edge Singapore that the group could see “incremental improvement” on its net margins over the next few years due to its “more differentiated” product.
At the time, she also noted that the company’s direct exposure to China and the US was limited, with less than 20% of shipments sent to the US.
“In the long run, the big impact for our industry is how tariffs will impact the macro environment, the economy and demand, as well as how tech leaders like Apple are redesigning the electronic world, the whole ecosystem, and pricing. For that, we don’t know what will happen,” she said.
Like many other semiconductor players, she says that AEM is adopting a “wait and see” approach, as the risk of shifting government policies across different jurisdictions leaves many strategies up in the air.
“We’re excited about this and will continue focusing on what we’re good at. And well, we’ll try to figure out how the tariff situation will land. We focus on what we can control,” said Leong.
On June 26, AEM announced in a SGX filing that the group had revised its 1HFY2025 revenue guidance upwards from the previous range of between $155 million to $170 million, to the range of between $185 million and $195 million.
This was due to “an unexpected pull-in of orders” into FY2025 from one of the AEM’s customers under its non-cancellable, long-dated purchase order program for the customer’s inventory management purposes.
AEM will report its earnings on Aug 13.
AEM's chairman, since 2011, is Loke Wai San, whose investment firm Novos Tellus was a key investor in the group.
As at 2.44pm, shares in AEM Holdings are trading six cents lower or 3.49% down at $1.66.
