Shares of the SGX-listed AEM Holdings Ltd. (SG:AWX) dropped by nearly 9% after the company revealed an inventory shortfall, impacting its full-year profits. The company’s inventory is estimated to range between 5% and 7% below the previously announced level of S$358.6 million as of September 30, 2023.
AEM Holdings stated that the shortfall is due to “human error in transactions” in its internal software system. The company added that the existing controls and processes did not detect this error. Consequently, the company has initiated a review of its inventory and stock monitoring and tracking systems.
AEM’s full-year results for 2023 are scheduled to be reported in February 2024. AEM is a worldwide provider of semiconductor test solutions, covering multiple stages of testing for engineering and manufacturing units.
Analyst’s Reaction
Post-announcement, analyst Amanda Tan from DBS highlighted two possible situations, either one of which would adversely impact the stock.
In the first case, which the analyst believes has a higher chance of occurrence, the company may be able to fulfill some of its orders, causing a potential 2% reduction in its revenue estimate. This could result in losses of approximately S$15 million for FY23.
Secondly, AEM would fail to fulfill its orders and face further downfall in revenues along with higher losses. However, in the long term, DBS maintained its positive outlook on the stock based on the “technological superiority” of the company’s testing solutions. Overall, the analyst has a Hold rating on the stock and predicts a downside of almost 12%.
What is the Price Prediction for AEM?
According to TipRanks’ consensus, AWX stock has a Moderate Buy rating based on one Buy and one Hold recommendation. The AEM share price target is S$3.56, which is around 5% above the current trading level. The target price ranges from a low of S$3.0 to a high of S$4.11.
