A Zero Failure World

 

As at end-September 2023, AEM' s inventories were stated to be worth S$358.6 million. 

 

SEMICONDUCTOR equipment maker AEM Holdings : AWX 0% said on Sunday (Jan 14) that it has found a shortfall in the group&rsquo s inventories following an internal stock-taking exercise, which it expects to negatively impact the group&rsquo s profitability for FY2023.

 

As at end-September last year, the group&rsquo s inventories were stated to be worth S$358.6 million. This was shared in an investor update released on Nov 9, 2023.

 

However, a preliminary estimate suggests that the group&rsquo s inventories are anticipated to be 5 to 7 per cent lower than this figure, said AEM. It noted that the internal stock-taking exercise is still ongoing, and that it had taken into account &ldquo the ordinary and usual course of inventory movement&rdquo .

 

Based on an initial investigation into this issue, the group attributed the shortfall to &ldquo human error in transactions&rdquo with its enterprise resource planning system, which had occurred during the migration of production to the group&rsquo s Penang facility from Singapore.

 

These errors were not detected by the existing controls and processes that were in place, it added. As a result of its initial findings, it has begun a process to review its inventory and stock monitoring, as well as tracking processes and systems.

 

AEM expects the shortfall to have a negative impact on the group&rsquo s profitability for the financial year ended Dec 31, 2023. It will issue its unaudited condensed interim financial statements for the full year on or before Feb 29, 2024.

 

It also clarified that its internal stock-taking exercise was an internal exercise undertaken by the group, and is not part of the audit of the company&rsquo s accounts by external auditors.

 

As at end-September 2023, AEM' s inventories were stated to be worth S$358.6 million. 

 

SEMICONDUCTOR equipment maker AEM Holdings : AWX 0% said on Sunday (Jan 14) that it has found a shortfall in the group&rsquo s inventories following an internal stock-taking exercise, which it expects to negatively impact the group&rsquo s profitability for FY2023.

 

As at end-September last year, the group&rsquo s inventories were stated to be worth S$358.6 million. This was shared in an investor update released on Nov 9, 2023.

 

However, a preliminary estimate suggests that the group&rsquo s inventories are anticipated to be 5 to 7 per cent lower than this figure, said AEM. It noted that the internal stock-taking exercise is still ongoing, and that it had taken into account &ldquo the ordinary and usual course of inventory movement&rdquo .

 

Based on an initial investigation into this issue, the group attributed the shortfall to &ldquo human error in transactions&rdquo with its enterprise resource planning system, which had occurred during the migration of production to the group&rsquo s Penang facility from Singapore.

 

These errors were not detected by the existing controls and processes that were in place, it added. As a result of its initial findings, it has begun a process to review its inventory and stock monitoring, as well as tracking processes and systems.

 

AEM expects the shortfall to have a negative impact on the group&rsquo s profitability for the financial year ended Dec 31, 2023. It will issue its unaudited condensed interim financial statements for the full year on or before Feb 29, 2024.

 

It also clarified that its internal stock-taking exercise was an internal exercise undertaken by the group, and is not part of the audit of the company&rsquo s accounts by external auditors.

On Nov 10, the deemed substantial shareholding of Malaysia&rsquo s Employees Provident Fund Board&rsquo s (EPF) in AEM Holdings : AWX +0.92% crossed the 11 per cent threshold with a market transaction that saw 564,500 shares of the Catalist listed stock acquired at an average price of S$3.35 per share.

 

This followed on from the EPF&rsquo s deemed substantial shareholding in AEM Holdings crossing the 10 per cent threshold on Jun 21 and the 9 per cent level on Mar 2. Previously, the EPF&rsquo s deemed substantial shareholding in AEM Holdings crossed the 8 per cent mark in October 2022, exceeded the 7 per cent point in July 2022, and crossed the 6 per cent mark and 5 per cent substantial shareholder threshold in June 2022.

 

On Nov 9, AEM Holdings provided a Q3FY23 (ended Sep 30) business update and maintained the same FY23 guidance of between S$460 million and S$490 million provided with the H1FY23 results. The group has so far achieved revenue of S$387 million in the nine months of FY23 with a profit before tax margin of 2.6 per cent.

 

AEM Holdings attributed the slowdown in 9MFY23 revenue to overall sluggishness in the semiconductor industry, with most customers pushing out their capital expenditure related to testing to 2024 due to lower end demand across the industry.

 

On the strategic front, AEM has continued to invest in developing its suite of Test 2.0 innovations and capabilities. This has resulted in the group being awarded additional patents for its thermal capabilities in Q3FY23, and most of its customer engagements relate to next generation test requirements for advanced packaging chips used in high performance computing and AI.

 

The group also believes that the generative AI wave that gained momentum early this year, especially in the data centre space, is expanding to edge computing devices, increasing the overall transistor counts and architectural complexity.

 

It adds that these devices will face extreme test challenges that will translate into longer test times due to the increased test complexity and should provide long term tailwinds for the group&rsquo s Test 2.0 business. With regards to timing, the group believes demand for test solutions to address this market will be realised towards the end of 2024 and into 2025.

 

While ranking among the top 40 stocks by trading turnover this year, AEM Holdings has booked the twelfth highest net institutional inflows across the Singapore stock market.

 

Coinciding with the semiconductor downcycle, the past 12 months have seen the AEM Holdings&rsquo share price decline by 10 per cent. This week the price-to-book ratio of AEM Holdings declined to 2.0x, compared to the average five-year price-to-book ratio of 4.0x which coincided with a 240 per cent price return.

On Nov 10, the deemed substantial shareholding of Malaysia&rsquo s Employees Provident Fund Board&rsquo s (EPF) in AEM Holdings : AWX +0.92% crossed the 11 per cent threshold with a market transaction that saw 564,500 shares of the Catalist listed stock acquired at an average price of S$3.35 per share.

 

This followed on from the EPF&rsquo s deemed substantial shareholding in AEM Holdings crossing the 10 per cent threshold on Jun 21 and the 9 per cent level on Mar 2. Previously, the EPF&rsquo s deemed substantial shareholding in AEM Holdings crossed the 8 per cent mark in October 2022, exceeded the 7 per cent point in July 2022, and crossed the 6 per cent mark and 5 per cent substantial shareholder threshold in June 2022.

 

On Nov 9, AEM Holdings provided a Q3FY23 (ended Sep 30) business update and maintained the same FY23 guidance of between S$460 million and S$490 million provided with the H1FY23 results. The group has so far achieved revenue of S$387 million in the nine months of FY23 with a profit before tax margin of 2.6 per cent.

 

AEM Holdings attributed the slowdown in 9MFY23 revenue to overall sluggishness in the semiconductor industry, with most customers pushing out their capital expenditure related to testing to 2024 due to lower end demand across the industry.

 

On the strategic front, AEM has continued to invest in developing its suite of Test 2.0 innovations and capabilities. This has resulted in the group being awarded additional patents for its thermal capabilities in Q3FY23, and most of its customer engagements relate to next generation test requirements for advanced packaging chips used in high performance computing and AI.

 

The group also believes that the generative AI wave that gained momentum early this year, especially in the data centre space, is expanding to edge computing devices, increasing the overall transistor counts and architectural complexity.

 

It adds that these devices will face extreme test challenges that will translate into longer test times due to the increased test complexity and should provide long term tailwinds for the group&rsquo s Test 2.0 business. With regards to timing, the group believes demand for test solutions to address this market will be realised towards the end of 2024 and into 2025.

 

While ranking among the top 40 stocks by trading turnover this year, AEM Holdings has booked the twelfth highest net institutional inflows across the Singapore stock market.

 

Coinciding with the semiconductor downcycle, the past 12 months have seen the AEM Holdings&rsquo share price decline by 10 per cent. This week the price-to-book ratio of AEM Holdings declined to 2.0x, compared to the average five-year price-to-book ratio of 4.0x which coincided with a 240 per cent price return.