KUALA LUMPUR: Semiconductor company Aemulus
’ 1QFY16 result was below CIMB Equities Research and consensus expectation due to lower than expected sales in the quarter.
The research house said on Tuesday revenue and net profit in 1QFY16 were sequentially lower due to seasonal weakness and weaker industry demand.
“But we still expect healthy sales and earnings recovery from 2QFY16 onwards, driven by seasonal demand pick-up and stronger sales from newer testers,” it said.
CIMB Research cut its FY16-18 EPS by 14%-15% to account for lower shipment volume on the back of weaker industry demand.
“Maintain Add with lower 60 sen (from 70 sen) target price still based on 15 times CY17 price-to-earnings (P/E),” it said.
Aemulus’ Q1 revenue fell by 69% on-year to RM2.7mil from RM8.7mil due to lower tester and module shipments.
This is attributable to seasonal demand weakness and a slowdown in global semiconductor industry demand. Most of its key markets, including Malaysia, Singapore and the US, recorded lower sales volume.
“As a result, the group swung to a net loss of RM1.9mil (vs. RM2.5mil core net profit in 4QFY15). There is no on-year performance comparison given that Aemulus was only listed in September 2015,” it said.
CIMB Research said in addition, Aemulus incurred higher operating expenses in the quarter following an increase in headcount. Headcount rose by 15 to total 100 in 1QFY16. Aemulus expects to add another 15 to its headcount in the coming quarters in order to support its projects on hand.
Despite of the weak performance, the research house expected Aemulus to show stronger earnings performance in and beyond 2QFY16, driven by a seasonal recovery in industry demand and better sales from newer tester products.
“Apart from that, we also expect Aemulus to gain more orders from China and Taiwan following new customer wins in 1QFY16.
“We still project a decent revenue growth for Aemulus, driven by higher shipments of its Amoeba 7600 and 4600 testers on the back of resilient demand for RF components and enterprise storage.
“In addition, we expect another new tester, Amoeba 4900, to start contributing from FY17 onwards. Overall, we expect a three-year EPS CAGR of 35%," it said.
The research house said although weak market sentiment could dampen Aemulus’ share price in the near term, we believe the company’s fundamentals are intact given its strong products portfolio and highly-experienced management team.
“Overall, we maintain our Add rating, with a lower 60 sen target price still based on 15 times CY17F P/E, a 20% discount to the global ATE peer average of 18 times.
“Potential re-rating catalysts include new tester design wins, sustainable margin expansion and potential transfer to Bursa main market in 2016,” it said.
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