Broker: CGS International
Date of Report: August 20, 2025

AEM Holdings Ltd: Awaiting the Next Wave — Financial Outlook, Risks, and Opportunities in 2025-2027

Introduction: CGS International Resumes Coverage on AEM Holdings Ltd

AEM Holdings Ltd, a leading Singapore-based semiconductor test solutions provider, finds itself at a crossroads in 2025. While the first half of the year brought a rebound in revenue and profit, the company’s path to a strong earnings recovery remains cautious. CGS International has resumed coverage of AEM with a “Hold” rating, reflecting both optimism about new customer momentum and a wait-and-see approach regarding meaningful, sustained growth.

1H25 Performance: Revenue Rises, Profit Rebounds, but Headwinds Remain

In 1H25, AEM reported a revenue of S\$190.3 million, a 9.6% year-on-year (YoY) increase, and a remarkable 283.9% YoY surge in net profit to S\$3.2 million. The growth was mainly attributed to the successful deployment of the AMPS-BI solution and a pull-in of orders from its key customer. However, a S\$5.9 million foreign exchange loss and a S\$4.1 million inventory provision led to a slight loss of S\$0.3 million in 2Q25. Book value per share as of June 2025 stood at S\$1.52.

Outlook: Flat 2H25 Guidance, Improving Prospects for FY26-27

For 2H25, AEM has guided revenue in the range of S\$170 million to S\$190 million, pointing to a flat or slightly declining half-on-half (HoH) trend. The second half will see continued AMPS-BI product shipments, but some orders were pulled forward into the first half, potentially dampening sequential growth. Management expects a ramp-up in production for a major AI/HPC customer in late FY25/early FY26 and is optimistic about a memory customer evaluating final test handler solutions, which could transition to volume production by late FY26.

Valuation and Recommendation: Hold As Investors Await New Customer Contributions

CGS International has upgraded AEM to a “Hold” rating, with a new target price of S\$1.44, up from S\$1.27. The valuation is based on 12.1x FY27F P/E, reflecting expectations of an earnings recovery and potential surge in demand from new products. AEM’s share price as of the report date was S\$1.41, with a modest 2.1% upside to the target price.

Shareholder Structure and Price Performance

– Venezio Investments: 12.4% – EPF: 7.8% – Pandanus Associates: 4.9%
AEM’s share price has been volatile, with a 1-month performance of -8.5%, a 3-month gain of 16.5%, and a 12-month gain of 16.5%. Relative to the SIMSCI, AEM underperformed by -21% over the past year.

Financial Summary: Recent Results and Three-Year Forecasts

Company Overview: Global Reach and Segment Breakdown

AEM provides advanced semiconductor and electronics test solutions, with a global footprint that includes manufacturing in Singapore, Malaysia, Indonesia, Vietnam, Finland, South Korea, and the US.

• Test Cell Solutions: 62.4% of 1H25 revenue, generating 92.7% of 1H25 pretax profit, with a 4.3% pretax profit margin.
• Contract Manufacturing: 35.2% of 1H25 revenue, 16.4% of 1H25 pretax profit, 1.34% pretax profit margin.
• Instrumentation: 2.4% of 1H25 revenue, posted a S\$0.5 million pretax loss.

Industry Overview: Semiconductor and Contract Manufacturing Trends

The Semiconductor Industry Association reported global semiconductor sales of US\$179.7 billion in 2Q25, an increase of 7.8% quarter-on-quarter and 19.6% year-on-year for June 2025. The World Semiconductor Trade Statistics projects global sales to reach US\$728 billion in 2025 and US\$800 billion in 2026, supporting a bullish long-term outlook for the sector.
The global electronic manufacturing services (EMS) market was US$609.8 billion in 2024 and is projected to reach US$1,033.2 billion by 2032, a CAGR of 6.9%. OEMs are increasingly relying on EMS providers for scalable production and supply chain resilience.

Financials: Recent History, Recovery Timeline, and Forecast Assumptions

AEM’s earnings upcycle began in FY17 and peaked in FY21 with revenue of S\$565.4 million and net profit of S\$92.0 million. FY22 was exceptional, with record revenue and profit as customers pulled forward orders due to Covid-19. The subsequent years saw normalization and a temporary oversupply, leading to a loss in FY23. The company returned to profitability in FY24.
Key forecast assumptions:

• FY25F revenue: S\$370 million (midpoint of guidance), net profit: S\$18.0 million (no repeat of major FX loss or inventory provision).
• FY26-27F: Revenue recovery to S\$430.4 million and S\$458.5 million, respectively. Net profit margins expected to improve to 7.5% (FY26F) and 8.1% (FY27F), with net profits of S\$32.3 million and S\$37.4 million.

Risks: Customer Concentration, Technology, and FX Exposure

• Customer Concentration: The key customer accounted for 49.7% of FY24 revenue. Any order cancellation, delay, or technology shift could impact AEM’s earnings. Notably, the key customer has lost market share recently, increasing this risk.
• Technology Risk: AEM’s success depends on innovation and customer adoption of new products. Failure to keep pace or differentiate could erode revenue.
• Foreign Exchange Risk: With revenue and costs in multiple currencies, FX volatility is a notable factor. A S\$5.9 million FX loss in 1H25 significantly reduced operating profit.

Peer Comparison: How AEM Stacks Up

Board and Management: Depth of Industry Expertise

AEM’s board comprises industry veterans from technology, finance, and private equity backgrounds, including:

• Loke Wai San (Non-Executive Chairman, Novo Tellus Capital Partners CEO)
• Chok Yean Hung (Non-Executive Director, ex-CEO, co-founder of UTAC and Ellipsiz Test/EEMS Asia)
• André Andonian (Independent Director, ex-McKinsey Managing Partner, Board of Analog Devices)
• Chou Yen Ning @ Alice Lin (Independent Director, ex-CFO Oracle Asia Pacific)
• James Toh Ban Leng (Lead Independent Director, Novo Tellus Capital Partners)
• Loh Kin Wah (Independent Director, extensive semiconductor leadership experience)
• Tham Min Yew (Russell) (Non-Executive Director, Temasek International)

ESG & Sustainability: Recent Progress and Ongoing Initiatives

AEM’s LSEG ESG score improved from C- in FY20 to C in FY23, reflecting better management practices, though challenges remain in shareholder, workforce, and emissions categories.
Key highlights:

• Average employee training hours in 2024: 33.8 (up from 11.0 in 2021)
• Implementation of a Learning Management System (since June 2021)
• Environmental compliance: 11 years with no regulatory breaches; water-glycol mixtures from cooling systems are properly recycled

Balance Sheet Highlights: FY23-FY27F

Conclusion: Cautious Optimism, Steady Execution Required

AEM Holdings Ltd stands at a critical juncture. While its fundamentals are stabilizing and new customer opportunities are emerging, headwinds such as customer concentration and FX volatility remain material. Management has set the stage for a meaningful earnings recovery in FY26-27, but investors will want to see evidence of delivery from new customers before re-rating the stock. CGS International’s “Hold” rating reflects a balanced view: upside potential exists, but patience and prudent monitoring are warranted for the coming quarters.