• AEM (SGX:AWX) announced that it has been selected to be the System Level Test (SLT) solution provider for an undisclosed memory device customer.
• While no financial impact guidance was provided, the announcement demonstrates that AEM has the technical solutions to win new customers.
• Reiterate our ADD call with a higher target price for AEM. We no longer peg a valuation discount to AEM as it proves that customer diversification is achievable.

Wins a Non-Intel Customer

• AEM announced that it has been selected to be the SLT solution supplier for one of the industry's leading memory integrated device manufacturers. AEM will provide this customer its AMPS SLT+ product which offers a full-stack solution, including high-speed device handling, seamless integration of test content, advanced thermal control, intelligent data tracking, and factory 4.0 automation readiness. Possible earnings impact scenario is provided in Figure2 of PDF report attached below.

ATECO Also Announced Some Wins Previously

• We also note that on 28 Jul 2021, ATECO (26.59% owned by AEM) announced memory test handler solutions.

Reaffirms Confidence That AEM Can Diversify Its Customer Base

• In its 1H21 results commentary, AEM had these engagements in FY22F

Reiterate ADD on AEM; Removing Valuation Discount

• Given the initial success in customer diversification, we no longer peg for AEM rises to S$4.78 from S$4.61 previously. 
• Potential re-rating catalysts are possible upward revisions to revenue guidance in the coming months and further new customer wins.
• Downside risks are delivery delays due to lockdowns/movement restriction extensions and competitive response from its competitors.

Source: CGS-CIMB Research - 31 Aug 2021