AEM Stellar 2Q2017 Performance Should Continue

(1)     Estimation of the fair market value of AEM:

AEM just announced a solid 2Q2017 result and its earnings per share for 2Q2017 is 12.5 cents, 196.5 percent better than that for 1Q2017. The net profit for 1H2017 is 682.1 percent better than that for the same period in 2016. To reward its shareholders, the management is also declaring an interim dividend of 2.5 cents, payable on 20 Oct 2017.

The management has also estimated the EPS for FY2017. And if we put EPS of 1Q, 2Q and the estimated values for 3Q and 4Q together, we have

EPS 1Q2017 = 6.36 cts

EPS 2Q2017 = 12.5 cts

Estimated EPS 3Q2017 = 6.07137348 cts

Estimated EPS 4Q2017 = 6.07137348 cts

                       

Forward EPS 2017 = 31.00274696 cts

                       

Given the closing price of 286 cts on 7 Aug 17,

p/e = 9.2249890x

If p/e = 10x then p = 310.0274696 cts

p/e = 11x then p = 341.0302166 cts

p/e = 12x then p = 372.0329635 cts

So, when I said “No $3.50, no sell” before the release of the 2Q2017 result, I think I was spot-on if Mr Market is to take the p/e of the company as between 11x to 12x. However, from past experience we know that the management has been very cautious in giving forecast and I strongly believe that EPS for 2H2017 should be better than the figure forecasted by them.

(2)     Confidence displayed by both Chairman and CEO

Mr. Charles Cher, AEM’s Group CEO, commented, “With our improving financial performance, we are declaring an interim dividend of S$0.025 per share to reward our shareholders. With our half-year performance and the sales orders recorded, we expect to achieve revenue and operating profit before tax of at least S$200 million and S$24.0 million respectively for FY2017.”

Mr. Loke Wai San, the Group’s Chairman, added, “The global semiconductor outlook for 2017 and 2018 looks positive. We continue to invest in improving our technical capabilities, delivery and field service support to better serve our main customer’s longer term roadmap and global footprint requirements. At the same time, we continue to be on the lookout for possible acquisition targets that are synergistic to our business.”

I think Mr Market has been slow to recognize the intrinsic value of AEM but I have the patience to wait for him to do so.  

Superphang
http://superphang.blogspot.sg