UG Healthcare Share Price upside from system-level test’s structural growth prospects from new customers/ stronger-than-expected order momentum; and On top of being the value-for-money alternative, AMD recently announced its Ryzen 5000 series chips and claimed that it is the “world’s best gaming CPU”, taking a direct shot at Intel’s Core i9-10900K processor, which Intel boasted as the “world’s fastest gaming processor”. Should they prove to be successful, servers due for refresh may replace existing Intel server chips with ARM-based ones and Intel faces the risk of being phased out. Now, let’s move on to the financial analysis. Downgrade To SELL, Singapore Telcos - CGS-CIMB Research 2020-12-10: Back Online In 2021F, Singapore Retail REITs - DBS Research 2020-12-09: Defend & Conquer, NanoFilm Technologies - CGS-CIMB Research 2020-12-16: Key Takeaways From Virtual NDR, Top Glove - DBS Research 2020-12-10: A Befitting Windfall; Strong Demand Continues, CapitaLand Integrated Commercial Trust - Maybank Kim Eng 2020-12-15: Proxy To Recovery, Rubber Gloves - UOB Kay Hian 2020-12-18: Prospects Are Intact But May Be Weighed By Sentiment, Singapore Stock Alpha Picks (Dec 2020) - UOB Kay Hian 2020-12-07: Reshuffling After A Strong November; Drop DBS, Short SIA, Add Nanofilm. It was long thought that Intel’s Optane business was subsidized by the NAND business as its prices are half of the DRAM memory which it is trying to displace. All opinions/statement are made based on public information only. Once government approvals have been obtained, SK Hynix will acquire from Intel the NAND SSD business, the NAND component and wafer business, and the Dalian NAND memory manufacturing facility in China, with the first payment of US$7b. i. However, data center competition is starting to intensify with AMD’s acquisition of Xilinx and Nvidia’s acquisitions of Mellanox and ARM. General Technical Service … Thank you! Leading-edge HDMT technology has helped its core customer achieve 2x savings in chip-testing costs. And without technological advances to get on par, or ahead, of its competitors, Intel might very well find itself in the position of IBM or Nokia in the past. AEM Holdings's earnings have taken off like any random crypto-currency did, back in 2017. I like AEM Holdings since they are very exposed in the semiconductor industry, and also because one of their key customers is Intel, who is very huge as you might know. We now value AEM Holdings at 14x FY21E P/E, from ROE-g/COE-g derived 5x blended FY20-21E P/B, to better account for: . Additional capital expenditure is likely to be incurred for chip testing, which will benefit AEM in the short-term. As competition in the PC segment heats up, Intel is looking to shift its focus to the more profitable data-centric business (Data Center Group (DCG) and other data-centric business segments), which collectively accounted for ~50% of Intel’s total revenue in 2Q20. more money can flow into these shares to support a higher valuation). However, I am of the opinion that investing in AEM carries oversized downside risks (i.e. Intel is understood to be AEM's major customer even though tech contractors such as AEM typically do not disclose the identity of key customers due to confidentiality requirements. AEM Holdings Ltd (AEM SP/AWX.SI) ... key customer’s business strategy, AEM’s new acquisition, and an inclusion of a bull case scenario. For context, Intel has been dominating the personal computing (PC) segment for years, specifically in the central processing unit (CPU) category. We raise FY20-22E EPS by 5-7% to account for this. By focusing on advanced manufacturing solutions for high-volume, high-growth products, AEM has established valuable and long-term partnerships with customers, and maintaining its position at the forefront of manufacturing innovation. AEM’s valuation will likely be challenged due to the rotation out of the Tech sector and the Equity asset class; ARM-based processor’s success in displacing x86 chips will have significant adverse impact on Intel and AMD (x86-based chips); Intel’s ability to consistently roll in revenue and profits from its DC business (given the lacklustre third quarter performance); and. OCBC Share Price, Glove/PPE makers: But if Apple Tree X brings in $15 ($1 x 15), why is it only worth $10 today? AEM is a global leader offering application specific intelligent system test and handling solutions for semiconductor and electronics companies serving advanced computing, 5G and AI markets. AEM Holdings Ltd. Join Date: Sep 6, 2019. The sale of Intel’s NAND memory business might bog down AEM’s sales in the near term as there will be less chips to test post-deal, and hence, less consumables will be required (given the Optane is of smaller size). In August 2020, Nvidia acquired ARM to extend its product line into the CPU segment. They make your CPU chips which are widely used in almost every single computer or laptop you can find in the market. In essence, options granted to Loke Wai San gives him the right to buy additional shares of AEM Holdings at a discounted price. In all likelihood, the rapidly expanding DC market and AEM’s new revenue streams from its multiple acquisitions (MuTest, DB Design, UTAC) will likely prop up AEM’s performance. Investors should note that AEM will need to invest in hiring more senior executives as it seeks to win new customers. b. AMD looking to acquire Xilinx for FPGA technology, Akin to Intel’s US$16.7b acquisition of Altera in 2015, AMD’s proposed acquisition of Xilinx for US$30b is aimed at moving AMD’s focus from desktops and consoles to FPGA technology, which are crucial to server chips used in data centers. AEM Holdings Ltd . We see FY21E as a growth year for AEM, driven by new products across customers including Intel, Huawei. AEM Holdings Limited is a Singapore-based company, which offers application specific-intelligent system test and handling solutions for semiconductor and electronics companies serving computing, fifth generation (5G) and artificial intelligence (AI) markets. Become a Dealer. Thereafter, I pared down revenues in FY23F and FY24F to ~S$450m levels. US-China trade tensions), disruptions to operations (e.g. Sales Department [email protected] We help our customers deliver many of the most successful products in the 5G economy including microprocessors, high speed communications, IOT devices, and solar cells. Cloud Service Providers (CSPs), which are major data center customers, are increasing pivoting towards the use of ARM-based processors to reduce reliance on Intel and AMD. Data-center market competition intensifies with AMD’s acquisition of Xilinx and Nvidia’s acquisition of Mellanox and ARM. AEM Holdings (SGX: AWM) is an equipment solutions provider to largely semiconductor industry with some exposure to 5G as well. Notably, AEM’s GP and EBITDA margins fall below larger peers like Teradyne and Advantest (although it is arguably close to the peer average). The remaining assets, including IP related to manufacture/design of NAND flash wafers, R&D staff and Dalian fab workplace will be acquired upon final closing (expected to occur in March 2025) for US$2b. Below are the selected comparable companies. In Intel’s 2Q20 earnings announcement, the Company mentioned that its Optane memory business has finally reached break-even, which is an encouraging sign for Intel as Optane will be retained after the NAND memory business sale. Company ID: 14378. Comparable Company Analysis: Selected Global SoC Test Handler Equipment Providers. Nvidia’s growth had been largely fueled by the demand for GPUs, the main computing unit used to power accelerated computing systems, such as AIs, autonomous vehicles, super computers, etc.. Importantly, the chart below shows Intel was making losses in 4Q17, 3Q18, 2019 and 1H20 when most of its peers were enjoying a healthy operating margin. An unclear path to restore market leadership and a seemingly inevitable fall in valuations across the sector/market will continue to keep me on my toes. Below is the projected 3 financial statements used in the calculation of free cash flows to firm (FCFF). Please conduct your own due diligence before relying on the opinions presented on the site for your investment use. b. Overall, from a commercial point-of-view, holding on to AEM in the long term may inadvertently turn into a bet on a dying horse if ARM-based chips become successful. 52 Serangoon North Ave 4 Singapore 555853 . Run the numbers yourself!). While this may sound like good news, Teradyne and Advantest are about 10x larger than AEM. Outsourcing of manufacturing may lead to testing being outsourced as well — although the probability is likely low as Intel has co-developed equipment with AEM for more than 10 years now, and AEM’s equipment has reduced Intel’s costs significantly. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Meanwhile, Intel prepares for a response in Q1 2021 with its 11th Gen Rocket Lake desktop processors, further intensifying competition in the PC space. FCFF is basically a jargon that means cash that is readily distributable to all stakeholders of the firm (debt holders, preferred shareholders, equity shareholders). This is akin to saying Apple Tree X is worth $10 today because it will likely bring in $1 every year for the next 15 years. In this first section, I take a commercial review of AEM Holdings based on the latest developments relating to the Company and its broader market. General Technical Service [email protected] This was swiftly accompanied by a 1.5 million share disposal (1 million indirectly held) by James Toh Ban Leng, who is the single largest shareholder and a NED/ID of AEM Holdings, and also the Founder and NED of Novo Tellus. Source of the report is credited at the end of article whenever reference is made. Mu-TEST is ISO 9001 : 2015 Certified - Feb. 19, 2018 We continue to see. The NAND business contributed to 7% of Intel’s total revenue and 93% of its Non-Volatile Memory Solutions Group (NSG) revenue in 1H20, generating US$600 million in operating profits in the same period. For Aem Holdings, the figure is an impressive 19.9%. While I want to be convinced that these insider transactions may be nothing more than some astute investors timing the market, it is important to remain objective in evaluating if the insiders are exiting because of AEM’s prospects. But while this sounds good, it seems that the Company has generally prioritized share buybacks over investments in R&D and CAPEX. Furthermore, Nvidia plans to create products for the server CPU market that combines Nvidia’s AI and GPU offerings with ARM’s offerings. Post-deal, Intel will retain its smaller Intel Optane memory business, which houses the 3D XPoint memory co-developed with Micron. Here, we bring in the concepts of (1) time value of money / opportunity cost, and (2) risks. Valuation and Recommendation. Furthermore, s. , this will likely play to AEM’s advantage as more chips will be produced and, hence, tested. Please check your email for further instructions. Intel is planning to sell its NAND memory business to SK Hynix. Furthermore, if rumors of Intel outsourcing its chip manufacturing crystallizes, it will also provide a boost to the demand for test handler equipment, further lifting AEM’s performance. While it is irrefutable that Intel will lose data center market share, it is losing share in a rapidly expanding market. So why is Intel selling its NAND business? Warranty/Return. For a company, this ranges from political risks (e.g. Here, an exit multiple of 7.7x EV/EBITDA in FY2024F and WACC (discount rate / hurdle rate as discussed earlier) of 10.0% are assumed. With CSPs being the largest client segment in the data center market and for Intel’s data-centric business (accounting for 47% of DCG’s revenue), this development is quite concerning for Intel. Thus, we apply a “discount” on the projected future cash flows to account for these risks and opportunity cost of investing in an Apple Tree, as we would for a company. Sales Department [email protected] As this article is becoming quite lengthy, I will try to keep this section as succinct and informative as possible. Revenue from tools and machines and revenue from consumables and services accounted for about 53% and 47% of … Riverstone Share Price b. Nvidia acquiring Arm for US$40B: Market is moving away from x86 to ARM architecture, posing a huge threat to Intel’s long-term viability in PC business. Also, we have to account for the risks associated with buying and growing Apple Tree X. Regardless of how rosy MEMS, 5G, IoT or AI trends look, I will prefer to err on the side of caution and continue to monitor developments in this space. Stock analysis research and articles on this site are for the purpose of information sharing and do not serve as recommendation of any transactions. AEM’s Executive Chairman Loke Wai San commented, “We are thrilled that the team at DB Design is now part of our AEM family. Dealer Locator. are major customers of AEM Holdings and Qualcomm is a potential customer. Tech stocks closed out a ‘nightmare’ September with the tech-heavy NASDAQ shedding ~5% as Big Tech stocks took a nose dive. social unrest / war / natural disasters), and perhaps even the possibility of bankruptcy / insolvency. CALL US 8am-5pm M-F PST! Regardless of how rosy MEMS, 5G, IoT or AI trends look, I will prefer to err on the side of caution and continue to monitor developments in this space. While I have not followed this market for long, it seems clear that engaging in acquisitions to break new ground is the name of the game. And typically, as companies grow, it becomes harder to maintain a high level of profitability. Based in Singapore, AEM serves its customers 24/7, across the entire manufacturing lifecycle, using its network of factories and field support locations worldwide. However, this threat is mitigated by the fact that not many companies have the resources to do so. Press Releases. In the event that you choose not to seek advice from such advisers, you should consider whether the product in question, or any course of action recommended, is suitable for you. Sponsorship. As semiconductor nodes decrease and heterogeneous packaging becomes mainstream, the need for system level test (SLT) is likely to increase. In essence, it is the money that is in excess of amounts needed to keep the company operational (after paying salary, rent, utilities, administrative expenses, tax, buying and maintaining machinery, etc. AEM Web Site Sales/Order Inquiries [email protected] [How to read the table: (1) match exit multiple column with desired discount rate row, (2) intersecting point is the implied share price given those two assumptions –> e.g. As such, I first compared AEM to global System-on-Chips (SoC)/IC test handler equipment providers (with a PC/DC client base) before comparing them with backend test equipment provider that are closer to home. Sri Trang Agro-Industry Share Price (310) 484-2322. Support us and give our facebook page a 'like' or 'share' if you like the articles here! This is a stock that I invested in and exited fairly early to realize the sizable amount of profit, at least for newbie like me haha. However, one has to take into account the inflated valuations in the Tech sector and tone down expectations of AEM achieving such valuation multiples in the future. Videos. a. Downgrade DBS OCBC UOB To SELL. Essentially, it is saying the value of the company TODAY is equals to the sum of discounted free cash flows to firm (FCFF) in the next 5 years + the value of the business based on existing public market valuations in 2024 (discounted to present day). AEM Holdings, in the recent past, has benefited from its solid business with just one … If you enjoy reading the article and find it helpful, please consider subscribing to The Hatch Fund’s newsletter to get the latest notifications and insights! We believe these are opportunities to BUY on dips, given, Key risk to our view is if Intel loses more market share than expected, which may result in lower demand for. ), and hence, readily distributable to said stakeholders. Customer concentration remains high (85%+ of revenues linked to one of biggest IT companies globally) but new growth opportunities with Huawei and Novoflex could potentially add meaningfully to earnings and customer diversification as of FY20. downside is significantly more than upside) in the longer term for the following reasons: This is not to say that AEM’s performance will collapse as Intel loses market share, but I expect the market to take this news badly and oversell AEM. The rollout of 5G enables increased complexity in mission-critical applications – in turn creating unprecedented challenges in chip testing. AEM Holdings - Maybank Kim Eng 2020-11-21: 5G Beneficiary, Sembcorp Industries - UOB Kay Hian 2020-11-24: Well Positioned For Recovery In 2021, Volume Breakout - SGX Stocks with Surging Volume, Price Target with Substantial Upside /Downside Potential, Price & Volume Breakout - Stocks at 3-Month High, Price & Volume Breakout - Stocks at 3-Month Low, System level test is gaining traction, due to rising complexity of chips, and the need to test mission-critical devices reliably. Teradyne and Cohu are NASDAQ-listed while Advantest is listed on the Tokyo Stock Exchange (TSE), making them much more accessible to global investors (i.e. AEM is a global leader offering application specific intelligent system test and handling solutions for semiconductor and electronics companies serving advanced computing, 5G and AI markets Listed on SGX Market Cap ~S$600m AEM Holdings Limited (AWX.SI) Revenue 2018 : S$262.3m 2019 : S$323.1m 1Q20 : S$146.8m 2020 : Guidance of S$360m - S$380m Strategically, AEM significantly bolsters Alliance’s growing national presence, and provides increased capabilities to respond to complex, challenging emissions monitoring and testing projects. Singapore Banks - Maybank Kim Eng 2020-11-24: Too Fast, Too Furious. This allowed ARM’s global market share in core design architecture for mobile processors grow to more than 90%. AEM revised revenue guidance from S$460m – S$480m to S$480 – S$500m will likely be ignored by the market. 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