AEM Holdings (SGX: AWX) shares are up 6.6% in Singapore today. There’s no specific news to accompany this, just changes in market sentiment we think. The global semiconductor industry is going through changes, this will obviously have an effect on semiconductor testing.
As we’ve said before about AEM Holdings: “There is no specific news here driving that 6.5% rise. It looks just like a change in the general view of AEM and its prospects. Which does make a certain amount of sense. As we've pointed out about Nvidia earlier today the development process of a new technology is from general purpose chips to application specific. AI is going to move from GPUs to ASICs soon enough. As Brainchip Holdings is showing, this is already happening. Each new ASIC - and there will be many, one for each intended purpose. For that's the point, to optimise a known process - will require testing. Boom times for semiconductor testing equipment manufacturers.
That's actually fairly standard technological change. But we've another issue supercharging this too. Which is that the Americans want to stop selling chips to the Chinese. The Chinese are subsidising domestic chip manufacturing. The Europeans have the usual plans for the EU to do something or other about chip manufacturing. Everyone is being infested with the same economic nationalism at the same time. That this is a bad idea if obvious. But more chip factories littered around the world in however uneconomic a fashion does mean a larger market for semiconductor test equipment.”
AEM Holdings share price from Google Finance
Other than that set of observations there’s not much information here. A cash flow evaluation of AEM Holdings: “The projected fair value for AEM Holdings is S$3.32 based on 2 Stage Free Cash Flow to Equity. Current share price of S$3.43 suggests AEM Holdings is potentially trading close to its fair value. Analyst price target for AWX is S$3.58, which is 8.0% above our fair value estimate.” We’ve got to admit we don;t place that much weight on such calculations. We think sentiment sways more than numbers.
Or analyst guesses: “Following the latest downgrade, the seven analysts covering AEM Holdings provided consensus estimates of S$484m revenue in 2023, which would reflect a disturbing 20% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to dive 81% to S$0.038 in the same period. Before this latest update, the analysts had been forecasting revenues of S$594m and earnings per share (EPS) of S$0.24 in 2023. Indeed, we can see that the analysts are a lot more bearish about AEM Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.” We tend to think the industry is going to be expanding soon enough, that wave of AI work.
But it’s differences of opinion that make markets, right?
