Aemulus Holdings Group (“Aemulus” or “the Group”) is principally involved in designing and development of automated test equipment, test and measurement instruments, and the provision of design consultancy and test-related services. In view of its expansion plans and strong demand from existing customers, we forecast Aemulus to register earnings of RM17.7m and RM23.4m in FY2022 and FY2023 respectively. BUY with target price of RM1.00 based on 34x PER (peers’ average) over FY22 EPS with a potential upside of more than 40%.

Aemulus market coverage ranges from consumer gadgets, enterprise storage, automotive and Internet of Things (IoT). Its flagship automated test equipment includes Amoeba 7600 which caters to mobile phones & tablets markets; Amoeba 7300 that caters for consumer electronics market; as well as CMOS image sensors (CIS) tester which caters to IoT devices market.

The mobile and tablets segment is now the main contributor to its revenue. Management has also guided that demand for its radio-frequency (RF) and CIS testers remains strong and Aemulus’s order book remains robust in this financial year. According to Yole Developpement, the RF Front-End component market is forecasted to increase from USD2.7bn in 2021 to USD4.3bn in 2026 (10% CAGR). The increase of 5G smartphones silicon content will drive demand for foundry service and wafer foundry manufacturers sales due to tight supply.

The Group has raised fund of about RM63.7m through a private placement following the issuance of 60.7m new shares at RM1.05/share in 13 Dec 2021. The group plans to utilise the proceeds for its capacity expansion plan at Aemulus Base, research & development (R&D), additional investment in its China joint venture, TMSS Technology, repayment of borrowings and working capital requirement. According to its management, new capacity expansion at Aemulus Base, Bayan Lepas, could increase the group’s production capacity by 50% by end of this calendar year (which translates to an estimated revenue capacity of RM120m).

Aemulus has a healthy balance sheet with net cash position of RM62.1m.

Source: Rakuten Research - 14 Apr 2022