Skip to main content

AEM Holdings Ltd. (SGX: AWX)

As promised from my previous Watchlist Update, I am here to share with you the stock that shot right up to my list of above average business at below average prices. It is none other than AEM Holdings Ltd. (SGX: AWX).

I scooped up some shares at $6.25 a few days ago despite hearing "Wow, it's already so high! Better not buy" and "You should wait for it to drop a bit first".

Personally, I feel that given its current financials and fundamentals, it is still severely undervalued. Lets take a look at my screener statistics out of 37 stocks that fit my criteria.



AEM Holdings Ltd. (SGX: AWX) 

Business Description

AEM Holdings Ltd, an investment holding company, provides solutions in equipment systems; and precision components and related manufacturing services for various industries. The company operates through Equipment Systems Solutions and Precision Component Solutions segments. It provides high density modular test handlers, wafer handling systems, hot spot testers, and smartcard backend handlers for use in semiconductor, solar cell, and smartcard manufacturing facilities, as well as related tooling parts; and designs, develops, and manufactures precision engineering products, such as test sockets, device change kits, stiffeners, golden units, holding jigs, preventive maintenance kits, and precision mechanical assembly modules for use in the electronic, life science, instrumentation, and aerospace industries, as well as offers engineering services. The company offers its products through a network of sales offices, associates, and distributors in Asia, Europe, and the United States. AEM Holdings Ltd is headquartered in Singapore.

Current Strategy Statistics as of 3rd Mar 2018 

Market Cap: SGD 423mn
EBIT/Enterprise Value: 9.8% (Ranked 6th)
EBIT/(Net working capital + Net Fixed Assets): 785.4% (Ranked 1st)

I was blown away by the return on invested capital (EBIT/(Net working capital + Net Fixed Assets)) of AEM. That means for every SGD 1 of invested fixed asset, the company was able to generate SGD 8.85 of earnings before interest and tax.

In the capitalist society, competitors would definitely enter the market given the high margins. I will continue to monitor this ratio of AEM. If it manages to maintain such a high margin, that means that it has a unique selling point which competitors are unable to copy.

I did a quick search and found this article which mentions:

"For eight years, AEM Holdings has, in partnership with its key customer (widely known to be Intel Corp), developed equipment that is so attractive to Intel that it renders AEM's competition obsolete."

and "AEM, which owns the IP, has become the sole source -- a status that is practically unheard of in global manufacturing -- of such equipment for Intel."

This information seem to suggest that such high margins will remain high for the foreseeable future.

It's quite simple, the more semiconductors are manufactured, the more testing would be required, which converts to more testing equipment.

In 2016, Frost and Sullivan conducted an extensive survey of major semiconductor manufacturing firms; the results of this survey formed the basis for a recently released report that optimistically projects a combined annual growth rate (CAGR) of 4.5% in materials growth for the next five years. This market consists of all materials sold to manufacturers of semiconductor chips and printed circuit boards (PCBs). (Source)

Additionally, AEM's is planning to issue 3 for 1 bonus share in order to boost liquidity of its shares. This usually results in an over all increase in shareholder's wealth after the bonus issue.

What are your thoughts on AEM? I would love to hear them in the comments below.

Cheers.

Comments

  1. AEM Holdings is definitely a keeper. They have announced that FY2018 to be stronger than FY2017, giving a profit guidance of PBT 42 million SGD for FY2018. And that was announced just first few months into 2018. Needless to say, this guidance is set to increase. With the Penang facility being fully operational in 2018, and orders from key customer to be streaming in, the PBT for FY2018 is going to shoot upwards. Not forgetting the amount of cash they have at hand, I believe the wise management will acquire synergistic companies that are profit-making. This will add on to the PBT.

    So what more can I say about this company?

    Staying vested till the issuance of bonus shares and dividends. HUAT AH!

    ReplyDelete
  2. Helpful and also superb page layout, although discuss nutritional requirements combined with options and also suggestions, quite a few great facts and also motivation. Cheers towards the great facts. Recreational online dispensary Canada

    ReplyDelete

Post a Comment