Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:11019:1">AEM Holdings (AEM SP)</a> posted stellar FY19 results and upped its 2020 guidance. Long-term the company's TAM continues to rise and diversification away from core-client <a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:16764:1">Intel Corp (INTC US)</a> will gather pace in FY20-21.</p><div>
<div><p>Management must be bullish on its FY20-FY21 prospects if we believe Charlie Munger's <em>"show me the incentives and I will show you the outcome"</em> motto. On 07/10/19 the board granted a <a href="https://links.sgx.com/FileOpen/Announcement%20PSP%20and%20ESOS%207Oct19.ashx?App=Announcement&amp;FileID=581029" target="_blank" rel="noopener">Mega Grant of Performance Shares</a> to both the Chairman and CEO to complete its Transformational Roadmap (aka diversify away from Intel). The options and share grants were priced at 1.14 SGD.</p></div>
<div id="annotable-executive_summary-2">While investors in ASEAN SMIDcaps often have to worry about the alignment of the promoters and the interests of minorities we believe they are aligned at AEM. Free float is over 83% which also <strong>makes AEM a prime takeover candidate</strong>, but not before maximum value has been extracted by the current management team.</div>
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</div><p>Net cash is over 107M SGD (18% of market cap) and should continue to grow as its record order book for FY2020 gets delivered. So far it sees no impact from Covid-19.</p><p>Our revised Fair Value is 3.7 SGD (previously 2.5 SGD) which equates to a market cap of 1 billion SGD but an EV of just 898M SGD. At this kind of valuation the stock would still only be trading at 14.8x 2020 EPS, a level easily justified by its fast growth, high margins and high ROE. Looking at its peers such as <a href="https://www.smartkarma.com/entities/cohu-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7990:1">Cohu Inc (COHU US)</a>, <a href="https://www.smartkarma.com/entities/teradyne-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:13088:1">Teradyne Inc (TER US)</a>, <a href="https://www.smartkarma.com/entities/chroma-ate-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7731:1">Chroma Ate Inc (2360 TT)</a> or <a href="https://www.smartkarma.com/entities/pentamaster-corp-bhd" target="_blank" rel="noopener" data-smartkarma-citation="entities:15302:1">Pentamaster Corp (PENT MK)</a> we note that they trade at an average P/E multiple of 23.9x, 13.5x EV/EBITDA and 3.4x P/B with a 1.8% dividend yield. </p>

AEM Holdings (AEM SP) posted stellar FY19 results and upped its 2020 guidance. Long-term the company's TAM continues to rise and diversification away from core-client Intel Corp (INTC US) will gather pace in FY20-21.
Management must be bullish on its FY20-FY21 prospects if we believe Charlie Munger's "show me the incentives and I will show you the outcome" motto. On 07/10/19 the board granted a Mega Grant of Performance Shares to both the Chairman and CEO to complete its Transformational Roadmap (aka diversify away from Intel). The options and share grants were priced at 1.14 SGD.
While investors in ASEAN SMIDcaps often have to worry about the alignment of the promoters and the interests of minorities we believe they are aligned at AEM. Free float is over 83% which also makes AEM a prime takeover candidate, but not before maximum value has been extracted by the current management team.

Net cash is over 107M SGD (18% of market cap) and should continue to grow as its record order book for FY2020 gets delivered. So far it sees no impact from Covid-19.Our revised Fair Value is 3.7 SGD (previously 2.5 SGD) which equates to a market cap of 1 billion SGD but an EV of just 898M SGD. At this kind of valuation the stock would still only be trading at 14.8x 2020 EPS, a level easily justified by its fast growth, high margins and high ROE. Looking at its peers such as Cohu Inc (COHU US), Teradyne Inc (TER US), Chroma Ate Inc (2360 TT) or Pentamaster Corp (PENT MK) we note that they trade at an average P/E multiple of 23.9x, 13.5x EV/EBITDA and 3.4x P/B with a 1.8% dividend yield. 

AEM Holdings (AEM SP): Stellar FY19 Results & On Its Way to Be 1 Billion SGD Market Cap

Malaysia

Pentamaster Corporation Berhad is an investment holding company.  The Company, through its subsidiaries, manufactures automated and semi-automated machines and equipment, designs and manufactures precision machinery components, as well as assembles and installs computerized automation systems and equipment.

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AEM Holdings (AEM SP): Stellar FY19 Results & On Its Way to Be 1 Billion SGD Market Cap

AEM Holdings (AEM SP) posted stellar FY19 results and upped its 2020 guidance. Long-term the company's TAM continues to rise and diversification...

Nicolas Van Broekhoven