As the saying goes, the darker the night the nearer the dawn. AEM share price could suffer a devastating train-wreck in the coming weeks as the Group unveiled a set of 1HFY2023 financial result that saw revenue plunged 49% year-on-year to $275 million while net profit crashed 76% year-on-year to $19.7 million. As at 11 August 203, AEM share price was trading at $3.42. Question now is whether the counter will see daylight soon?
The latest result extinguished any flickering of hopes that recovery for AEM’ semiconductor test solutions business will occur in 2023. The result also banished investors’ hope of a U-shape recovery for AEM share price. Evidently, recovery for the semiconductor industry is slower than expected as AEM management revised downward its revenue guidance for FY2023 from a target of $500 million to a range between $460 million to $490 million on the back of reduced test capital equipment utilisation levels across the industry.In the face of the recent dismal financial result, it will take a miracle for AEM share price to turn the tide unless something drastically positive takes place in the near future. This is unlikely to be the case. In fact, 3rd quarter financial result could be worse as the first payment of US$9 million will be made for the arbitration with Advantest.
On 28 July 2023, AEM dropped the bombshell that it has reached a US$20 million settlement with Advantest. In Advantest’ website, it is stated that:
“Advantest filed the arbitration alleging that Kabbani, while working full-time as an Advantest Test Solutions, Inc. Vice President, was also serving as the CEO, board member, and a principal owner of a side business, Lattice; inserted Lattice into Advantest’s supply chain without disclosing his active involvement in Lattice; and, further, arranged to have a sub-supplier locked into an exclusivity contract with Lattice, which allowed Lattice to gatekeep Advantest’s access to that sub-supplier. AEM then hired Kabbani as its Chief Technology Officer and purchased Lattice”
Following the revelation of the arbitration, AEM share price went into a correction mode, falling from $3.86 on 28 July 2023 to the current $3.42. The crisis of confidence of AEM share price was probably attributed to the outcome of the arbitration. Many investors were caught by surprise as AEM management had filed the following on 24 February 2022 in SGX:
“The AEM Entities have sought legal advice from their legal advisers in the United States of America, and have been advised that based on a preliminary analysis, the claims appear to lack factual and/or legal support”
On the basis of the SGX filing, I had not anticipated the outcome to be so adverse. Furthermore, AEM management also did not provide much update on the arbitration until 28 July 2023. To make matters worse, the SGX announcement made by AEM on 28 July 2023 did not shed much light on the dispute either. This is what was announced by AEM:
The complainants to the Arbitration are Advantest America, Inc. and Advantest Test Solutions, Inc., and the respondents to the Arbitration are Samer Kabbani, Lattice Innovation, Inc., Wavem US Inc. (a subsidiary of the Company) and the Company. Samer Kabbani founded Lattice Innovation, Inc. and is a former employee of Advantest Test Solutions, Inc. Lattice Innovation, Inc. was acquired by Wavem US Inc. in December 2020, while Samer Kabbani is currently the President of AEM International (US) Ltd. and the Chief Technology Officer of the Company.Previously, I wrote that I was 200% convinced that AEM share price would rise from the ashes to hit another new high. Given the current slump in the semiconductor industry, will AEM share price recover in 2023? In this article, I will share my view on the outlook for AEM share price in 2023.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter, so my views on AEM share price may be biased.
AEM share price in perfect storm
The outcome of the arbitration, coupled with the terrible 1HFY2023, presents a perfect storm for AEM share price, not least because of the settlement fee of US$20 million to Advantest. To add oil to fire, the arbitration also comes at a time when the Group is struggling with the inventory glut in the semiconductor industry. Whilst many investors would have expected the 1HFY2023 financial result for AEM to be bad, the knockout punch for AEM share price should be the [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]Lifetime Membership
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