AEM Holdings (AWX) Revisited Again


AEM rose another 76% over 3 trading days since “AEM Holdings (AWX) Revisited” was published last weekend. In aggregate, AEM has risen 364% in 4 months since the first article, “My Bull Case For AEM Holdings (AWX)“, was posted.

At S$2.57 per share, AEM has a market cap S$167m. With a ttm P/E of 19.5x, does AEM have further upside? Let’s find out…


What has transpired this week?

  • Q1FY17 results released and exceeded my expectations
  • Management provided a revenue and profit before tax (PBT) guidance for 9M17 of S$142m and S$17.5m respectively.
  • Maybank Kim Eng wrote a non-rated report
  • CIMB raised target price from S$1.79 to S$3.39 (+32% upside from current price)
  • Share price rose 76% in 3 days
  • AGM held on 27 April


Revised Back-of-the-envelop FY2017 NPAT,EPS, and Dividend Per Share Forecast

From the latest profit guidance provided by management:

  • 2Q and 3Q revenue should be around S$50m.
    • Take 142m less Q1 revenue of 42m; then divide by 2.
  • Implied pretax profit = 12.32%
    • 17.5m pretax profit divided by 142m revenue
  • Implied Net Profit Margin = 10.23%
    • Using 17% tax rate on pretax profit


  • Q4 revenue of S$50m (same as Q2 and Q3)
    • Sales order book will have to exceed 192m (from 152m currently) in FY2017

FY2017 Revenue should be around S$192m

FY2017 NPAT should be around S$19.64m

FY2017 EPS should be around S$0.3021

FY2017 DPS should be around S$0.0755 (25% of EPS)

On a forward basis, AEM is currently trading at 8.5x FY17 earnings with a prospective dividend yield of 2.9%(S$0.0755 / S$2.57) on a low dividend payout ratio of 25%.

With peers such as Ellipsiz (12.3x), Avi-tech (13.5x), UMS (18.1x) and Micro-Mechanics (14.5x) trading at their current valuations with lower growth prospects, it does seem that AEM is STILL fairly undervalued with further upside potential.



The key risk in my analysis lies in the ability of the company to fulfil at least S$192m worth of purchase orders without any hiccups as well as Intel not pushing back and/or cancelling orders. Management mentioned in the AGM that they have been extremely busy producing the HDMT for Intel and are increasing production capacity by increasing factory space and shortening production lead time. They are also looking to start production of the HDMT at their Penang factory. Management also explained that it is not as easy to sell the HDMT to other customers because the customers must first “have a change in their philosophy” and decide to develop their own testers before adopting AEM’s HDMT.

Given the insane price increase over the past few tradings days, I divested my stake in AEM on 26th April at an average price of S$2.65. I am left with 50 shares of the company.

In my opinion, there is too much optimism priced into the stock. The risk to reward proposition is no longer favorable at current valuations. More things could go wrong than right. For example, shortening the production lead time could negatively affect the quality of the HDMT produced. Ramping up production too quickly may cause other complications as well (e.g. hiring). On a technical front, it does seem that AEM is poised for its first major correction soon.

All in all, AEM is a great business with clear growth catalysts, however, at current valuations it is no longer a great investment with multibagger potential.

Disclaimer: I own shares in AEM Holdings.

Kenny Chia

Undergraduate, SMU

2 thoughts on “AEM Holdings (AWX) Revisited Again

  • June 21, 2017 at 1:39 PM

    chanced upon your blog while researching for AEM holdings. Currently there is price correct and trading at $2.40. What is your opinion of entry at this point?

    • July 10, 2017 at 11:12 AM

      At current levels there is still some upside. But not attractive enough for me to re-enter.


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