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What Investors Need To Know About AEM Holdings Ltd’s 2018 Q1 Results

AEM Holdings Ltd (SGX:A10) is one of the top performers in Singapore’s stock market since 2017. Shares are up 900% since the start of last year.

As a quick introduction, AEM Holdings Ltd produces systems, precision components and test handlers for semi-conductor, solar cells, and smartcard manufacturing facilities. Recently, the company released its results for the first quarter of 2018. With the company well and truly in the spotlight, I have decided to take a quick look at its performance to see whether it is living up to its hype.

Lets walk through some of the key takeaways from its latest quarterly results.

Operational highlights

Revenue for the quarter rocketed 55.9% to S$65.7 million, up from the S$42.1 million in sales recorded in the same period a year ago. Together with better cost-efficiencies and higher gross margins, profit for the period surged 98.6% from S$4.1 million a year ago to S$8.2 million in its latest quarter. Earnings per share rose 28.6% to 12.18 cents per share after adjusting for a 2-for-1 bonus share issued last year.

The group breaks down its business into two main segments – Equipment Systems (ESS) and Precision Components (PCS). The main growth driver for the quarter was ESS which saw a 58.5% increase in revenue. The increase in the segment’s sales was in line with an earlier announcement made by the company regarding increase in sale orders that it will deliver in FY2018.

AEM achieved positive cash flow from operations of S$6.95 million, up from S$2.9 million a year ago. It did, however, have a net spend of S$9.14 million on investments, including the acquisition of a subsidiary. As a result, the group had a negative free cash flow of S$2.19 million.

Financial position

As of 31 March 2018, the group had a strong balance sheet with cash and cash equivalents of S$43.0 million and S$0.24 million in borrowings. It had assets totaling S$140.5 million and liabilities of S$69.5 million. Combined, that translates to a net asset value of S$71 million. The latest figure is a 22% improvement from the end of the previous quarter on 31 December 2017 when it had net asset value of S$57.8 million.

Looking ahead

The management of AEM continues to be bullish about the business outlook for the group, saying:

“AEM continues progressing through the multi-year commercial rollout of its next generation handler platforms. In addition, semiconductor market outlook continues to be positive for 2018. According to the World Semiconductor Trade Statistics forecasts, the worldwide semiconductor industry is expected to grow by 9.5% to US$451 billion in 2018.”

On profit guidance, the company added that the profit guidance for the year remains unchanged at S$255 million in sales and S$42 million in operating profit.

Based on its current share price of S$6.60 per share, the group trades at 10.59 times its forward price-to-earnings and has a trailing dividend yield of 1.82%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor owns shares in AEM Holdings Ltd. The Motley Fool Singapore has a recommendation on AEM Holdings Ltd.