Positive momentum hinges on new product commercialization.
Although still in the early phase of ramping up production of its flagship product, KGI believes that AEM Holdings' growth prospects are positive from indicative orders from a leading major chip maker for the next five years.
AEM designs and builds high-density semiconductor test handlers used by the world’s leading chip manufacturers. According to the company, its machines allow significant quality and cost savings for customers. Its machines are the product of 5 years of research and development investments, and it is now in the commercialization phase, where it expects to achieve substantial growth in 2017.
KGI notes that the customisation of its machines – requiring years of close collaboration with customers - makes it difficult for competitors to penetrate the same segment.
KGI also believes that the focus on commercialising its high-density test handlers to customers is expected to see improved profitability in 2017.
"AEM has already posted two consecutive quarters of net profit growth. Trailing twelve months net profit is the highest in more than ten years," it said.
AEM's order book has almost doubled within the last nine months, increasing to S$45.5m as at 8 November 2016 from S$24.5m in March 2016.
According to KGI, AEM has a healthy financial position (net cash position of S$8m as at end 3Q16), low capital expenditure requirement, and is expected to generate positive cash flows from operations.
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