Back to convention centre, this time for another Singapore tech company AEM. If you are an income investor and looking just for dividend, you can stop reading here. There is nothing wrong being an income investor but one cannot expect the focus to be on dividend in a growth company.
Not just an income investor? Read on for some of the things shared during the meeting. Be warned that what you are going to read are likely warped by my mind!
In a nutshell
AEM aims to be a global company based in Singapore. At the global stage, the potential is huge especially for AEM Test 2.0 (pronounced 2 naught) test system. CEO Chandran shared based on their insight, addressable market will grow to $5.4b by 2024. A comparison of AEM revenue of $870m in FY2022 and their projection of $500m for FY2023 shows that it is still early days. However, competing in global stage also means intense competition. In the words of the Chairman Loke, “the giants have awakened”.
Progress with new customers and diversification
CEO reiterated that they have received positive feedbacks from potential customers and are at various stages of negotiations with them. What is hard to confirm is the timing in which the deals will be struck. Chairman shared that high interest rate is like a gravity which will impact on organization (customer) decision. And the semiconductor industry is still digesting last year’s supply glut.
As for customers diversification, Chairman shared internally they don’t think in terms of numbers but instead their focus is on how to win customers. CEO shared that their ideal is for everyone to grow. It does not matter if the growth comes from their main customer or from new customers. In another response, Chairman said it takes about 5 years to reach a deal in the semiconductor industry but once they win the contract, that itself would become a moat.
Acquisition and China market
AEM needs to do customisation at scale which means everything need to integrated at various levels. Hence, the various acquisitions in the past has allowed them to do that. These acquisitions in a way also help the group to get the necessary talents.
China is a huge market that cannot be ignored. However, they are mindful on how to work with them and protection of their IP. They would probably look for a partner if they eventually venture into China.
Invest with long term view
At the end of the meeting, I listened in to the chat of some investors with Chairman. I probably was too tired by then and now could not remember much of the conversation except that Taiwan is a market that they wanted to crack.
Besides iFAST, AEM is another Singapore company that I feel excited about. Both are ambitious and looking to establish themselves in the global stage. However, when investing in small growth companies, one needs to be comfortable with their up and down as they move through their business cycles.
Invest in them with the long term view and position the size accordingly to your risk appetite. Their potential is huge but there is no guarantee that they will succeed.