• We deem AEM's 1Q21 net profit at 12.6% of our full-year expectations as in line since we expect earnings to be 2H21 loaded.
• AEM has guided that FY21F revenue could be in the range of S$460m to S$520m.
• We reiterate our ADD call on AEM with a target price of S$4.63. We have yet to pencil in CEI (SGX:AVV)'s financials into our forecast.

A Breather After a Record 1Q20

• AEM (SGX:AWX)'s 1Q21 revenue fell 45.4% y-o-y/3.9% q-o-q to S$80.2m compared to a record 1Q20 revenue of S$146.8m. Net profit fell 63.5% y-o-y/26.5% q-o-q to S$13.2m versus the record S$36.1m in 1Q20.
• We deem AEM's 1Q21 revenue (15.2% of ours/14.4% of consensus FY21F forecast) and net profit at 12.6%/12.8% of ours/consensus FY21F expectations to be line as AEM has guided for a stronger 2H21 versus 1H21.
• AEM expects 1H21 financial performance to be weaker y-o-y.

Sufficient Tailwinds to Support Earnings

• On outlook, AEM has guided that FY21F revenue is expected to be between customer diversification efforts, AEM has been in deep technical optimistic on the prospects of its business with Intel (INTC US) and also highlighted the possibility that there could be meaningful revenue contributions from other customers in FY22.

Reiterate ADD

• We see the weakness in AEM's share price as a chance to ADD. For now, our target price for AEM remains unchanged at S$4.63 (Gordon-Growth derived P/BV multiple of 4.40x).

• Re-rating catalysts are possible upward revisions to delays due to lockdowns/movement restriction extensions, loss of competitiveness by its key customer and aggressive competitive response from its CEI (SGX:AVV)’s financials when AEM announces its financial statement for 1H21 sometime in Aug 21.

Source: CGS-CIMB Research - 4 May 2021