AEM Holdings closed at $1.86 on Oct 6, down 8.82% on news that Advantest Solutions had filed a complaint alleging patent infringement against the company and its subsidiaries, AEM Singapore and AEM Americas, Inc.
Advantest's complaint, which it filed in the U.S. District Court for the Southern District of California, alleges infringement of U.S. Patent Nos. 11,674,999 and 12,320,841. The patents relate to a specific wafer level test system that is not used by AEM.
Samer Kabbani, who was appointed CEO of AEM in July, was previously an executive vice president at Advantest before joining AEM in 2022 as its chief technology officer.
AEM says it has its own extensive patent portfolio and respects the intellectual property of others. In a statement on SGXnet, AEM says it "strongly denies the allegations in Advantest's complaint".
AEM has already retained U.S. counsel to defend itself against Advantest's claims, which lack merit, the SGX announcement says. The parties were previously involved in arbitration, which was settled on July 28, 2023.
"The filing of Advantest’s latest complaint does not affect AEM’s business operations, its existing commercial offerings or products, or its ongoing ability to serve its customers. The Company maintains its revenue guidance for 2H 2025 as previously announced on Aug 13," the announcement says.
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In a results release on Aug 13, AEM said revenue guidance for 2H2025 of $170 million to $190 million is broadly in line with 1H2025. This range reflects anticipated growth in AMPS-BI shipments in 4Q2025, partially offset by the timing of certain orders that were brought into 1H2025 and potential foreign exchange fluctuations.
In its note on Oct 6, DBS Group Research warns that prolonged litigation could raise legal costs, but near-term impact appears limited.
"While AEM’s confident response and reaffirmed guidance signal operational stability, a drawn-out legal process could add to legal expenses and weigh on margins," says DBS, which is keeping its "buy" call and $2.10 target price for now.
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AEM's financials from FY2021 to FY2023 reflected elevated legal fees due to prior arbitration, suggesting that extended proceedings could again impact profitability, points out DBS.
Legal and professional fees between FY2021, FY2022 and FY2023 amounted to $11.1 million, $27 million and $9 million respectively.
In contrast, such corresponding costs were $5.1 million in FY2020 and $9.2 million in the most recent FY2024.
"While it remains too early to gauge the duration or cost impact of the case, we continue to monitor for signs of escalation," says DBS.
