• UTAC and AEM have announced a partnership to develop test solutions for complementary metal-oxide-semiconductor (CMOS) image sensors.
• We view the partnership as being incrementally positive for AEM’s efforts to diversify its revenue stream.
• Reiterate ADD and Target Price of S$3.58.

Announces Partnership With UTAC

• According to eeNews Europe (18 May 2020), Singapore-based semiconductor assembly and test services provider UTAC Holdings Ltd has teamed up with AEM Holdings (SGX:AWX) to develop next-generation, cost-effective test system solutions for CMOS image sensor products.
• According to the partnership, CMOS image sensor sales are estimated to grow significantly, driven by demand from applications in the areas of security, automotive safety, autonomous vehicles and industrial.
• Through this collaboration, the partnership will create application-specific test solutions that will provide semiconductor companies with cost-effective solutions that are scalable and adaptable for future product lines.

Making Incremental Progress in Diversification

• As at end-1Q20, non-Intel revenue was 2% of AEM’s total turnover.
• We view this partnership as incrementally positive with AEM making further progress in diversifying its revenue stream.

Reiterate ADD

• Our Target Price is unchanged at S$3.58 (still based on Gordon Growth-derived P/BV multiple of 4.86x).
• Downside risks are further delivery delays due to lockdown/movement restriction extensions.

Source: CGS-CIMB Research - 19 May 2020