The Motley Fool

AEM Holdings Reported a 64.5% Spike in Profit. Here Are 3 Other Reasons Investors Should Be Pleased

AEM Holdings (SGX: AWX) released its second-quarter earnings update on 8th August. As regular readers may remember, AEM has been aggressively buying back its shares

In the most recent quarter, AEM surprised investors by posting better-than-expected revenue and profits. With that said, here are three reasons investors should be pleased about AEM’s recent results.

All-round improvement

As mentioned earlier, the headline numbers were extremely positive. Revenue and net profit increased by 34.8% and 64.5%, respectively. The group’s net asset value also increased by S$0.06, or 18%, to 39.3 Singapore cents.

The manufacturing company’s revenue was boosted by higher demand for its high-density test handler system as its main customer introduced new products based on more advanced semiconductor nodes. As AEM’s test handlers are optimised for testing complex logic chips, its customer increased its orders substantially.

AEM also recently updated its sales figures for the year, saying that it has received S$255 million for delivery in 2019, and increased its full-year guidance for between S$265 million and S$280 million.

Progress made to diversify its business

For now, AEM is still highly reliant on the sales of test handler systems and consumables of the test handler system.

However, the company reported encouraging progress in its other segments. The group said it delivered an early commercial system to a memory manufacturer for its AMPS (Asynchronous Modular Parallel Smart) platform. AEM said it’s aiming to develop accounts with other semiconductor manufacturers for solutions using its AMPS system.

On top of that, AEM said its recent acquisition, Afore, also secured an equipment order for its wafer-level environmental test solution. AEM described the progress as an “important first step in a multi-year process.”

All of these developments, while still in their early stages, could potentially help diversify AEM’s customer and product base in the future.

Share buybacks and dividends

Lastly, investors should be very pleased that the company is returning some of its excess capital to shareholders. The company announced a few rounds of share buybacks in June and July. It also increased its dividend from 1.5 Singapore cents a year ago to S$0.02 for the first half of 2019.

The Foolish bottom line

Despite the uncertainty regarding the sales of its high-density test handler system, AEM still had a decent quarter. Its higher recurring income through its consumables sub-segment is also a positive for the company.

Investors should also take heart at AEM’s efforts to diversify its income stream and to return excess capital to shareholders. All things considered, it was a good quarter for AEM and its shareholders.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore recommends AEM Holdings Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares of AEM Holdings Ltd.