• AEM's order book for delivery in FY20F (previously S$338m) increased to S$416m (+23%/+S$78m).
• The company raised its FY20F revenue guidance to S$430m-445m (S$360m-380m previously).
• Reiterate ADD; higher Target Price of $3.58 driven by new revenue guidance.

AEM Raises FY20F Revenue Guidance

• Late last night, AEM Holdings (SGX:AWX) announced that as at 4 May 2020, its order book for delivery in FY20 has risen to S$416m (+23% or S$78m from the 25 Feb order book of S$338m).
• AEM also revised upwards its FY20F revenue guidance to between S$430m and S$445m (previous guidance was between S$360m and S$380m). The new revenue guidance will be achieved with an unchanged capex guidance of S$4m. The high end of the revenue guidance at S$445m is 11% above our current FY20F revenue estimate.

Upward Revision Overdue

• The new guidance does not surprise us as we already highlighted this possibility in our previous note AEM Holdings - CGS-CIMB Research 2020-04-29: ADD ~ On Track For A Record Year. In that report, we noted that the company was overdue for an order book update since AEM's last updated order book was as at end 25 Feb.

Intel (AEM’s Key Customer) Progressing on Track

• Intel is continuing with its new chip launches. On 30 Apr, Intel introduced the 10th Gen Intel® Core™ S-series desktop processors, including Intel’s flagship Core i9-10900K processor which the company claims is the world’s fastest gaming processor. These processors are expected to be available globally in May.
• In terms of moving beyond its core strength in computers, Intel announced on 4 May that it has acquired Moovit, a mobility-as-a-service (MaaS) solutions company. Moovit is an urban mobility application that offers multimodal trip planning by combining public transportation, bicycle and scooter services, ride-hailing, and car-sharing. Intel said that the addition of Moovit brings its Mobileye (developer of vision-based self-driving car and ADAS) division closer to achieving its plan to become a complete mobility provider, including robotaxi services.
• Intel is investing and expanding to serve new data-rich market opportunities, including the fast-growing market for ADAS (advanced driver assistance systems), data and MaaS technologies, which together (in Intel’s view) could represent an opportunity totalling more than US$230bn by 2030.

Reiterate ADD; Higher Target Price Driven by New Guidance

• Incorporating AEM’s new FY20F revenue guidance, our Target Price increases according to new Gordon Growth derived P/BV multiple of 4.86x (versus 4.48x previously) as we increase our FY20F revenue by 12.5%.
• We leave our FY21-22F estimates unchanged for the time being.
• Re-rating catalysts are further increase in FY20 revenue guidance and better-than-expected profit margin.
• Downside risk is further delivery delays due to lockdown/movement restriction extensions.

Source: CGS-CIMB Research - 7 May 2020