AEM share price in trashy form again

Lifetime Membership AEM share price continues to break investors’ heart. Since my last blog post on AEM Holdings on 3 March 2024, the counter had somewhat stabilized at the levels of $2.30 to $2.50. However, the release of first quarter business update on 8 May 2024 caused a rupture in the form of AEM share price yet again. Year-to-date, AEM share price plummeted by a whopping 47%, making it one of the biggest falling stars in SGX mainboard.

The crisis of confidence among investors is understandable as the latest financial result was not only bad, but also worrying for investors. Whilst I can understand that revenue has declined substantially due to slower than expected recovery of Intel, the massive drop of 9.6% in profit before tax (PBT) margin to 2.9% befuddled me. Given that the management has already settled the US$20 million arbitration to Advantest, as well as the stupid inventory mistake in FY2023, there was really no justification for the abysmal PBT margin.

AEM share price

Profit margin is a key indicator of a company’s financial health and its ability at generating profit. The fact that AEM’s PBT plunged so much within a short time and without external factors was indeed disturbing to me. The worst thing was that the management did not provide any valid reasons for the collapse of the PBT margin for 1QFY2024. Instead, the press release stated “the Group remained profitable as its focus on driving operational efficiency and implementing tight cost control measures yielded positive results”.

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Sometimes I just wish that the CEO Chandran Nair could stop painting a rosy picture to investors and stop harping stuff like “the industry is at the cusp of an AI-driven revolution” and “the future years looks promising with the proliferation of AI capabilities at the edge”. Instead, the management should strive to be more transparent with investors. The poor financial results in recent years, combined with the out-of-the-blue arbitration settlement and the outrageous inventory shortfall had knocked the wind out of AEM share price. Surely, the management could do more to restore confidence?BullionStarTake for example, there was a restructuring charge of $2.1 million as a result of a re-organisation the Group undertook in 1QFY2024. The restructuring charge vindicated rumors circulating in an online forum of a retrenchment exercise being carried out by AEM. If there was indeed a retrenchment exercise by AEM Holdings, investors should be given information such as the estimated number of production staff being axed and the potential impact on the ramp that is expected to take place in the latter part of 2024.

And then there were the recent two program wins. The management made no mention on the size of the contract wins. To make things worse, there were rumours circulating that the contract wins actually [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.]

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