Cloud computing to drive Aemulus’ growth

by **Cals** Thu 28 Jan 2016, 22:07

Cloud computing to drive Aemulus’ growth

By CIMB Research / The Edge Financial Daily | January 28, 2016 : 10:15 AM MYT

This article first appeared in The Edge Financial Daily, on January 28, 2016.

[size=16]Aemulus Holdings Bhd ([You must be registered and logged in to see this image.] Valuation: N/A, Fundamental: N/A)
(Jan 27, 48 sen)
Initiate add with a target price (TP) of 70 sen: Aemulus Holdings Bhd is a designer of automated test equipment (ATE) for radio frequency (RF) front-end devices that are mainly used in wireless applications such as smartphones, tablets and wireless networking devices.

[You must be registered and logged in to see this image.]

Its strength lies in its portfolio of innovative products, deemed among the most efficient in the market. Based on our channel checks, its testers produce a throughput yield of up to 1.8 times versus competitive products.

We expect demand for RF testers to grow due to an increasing adoption of 4G networks, especially in emerging markets. The proliferation of 4G networks will lead to rising demand for advanced tester equipment. Aemulus’ key customer Avago Technologies Ltd expects RF content in smartphones to increase by 20% per annum over the next three years.

Cloud computing is a new growth driver for Aemulus. This follows a new design win in the enterprise data storage in 2014. Aemulus has successfully developed a new tester, Amoeba 4600, to serve the enterprise market. It started shipping these testers in March 2015. We expect revenue contributions from this product to reach 40% in financial year 2016 (FY16).

Aemulus derives 60% of its revenue from beyond Malaysia. Management plans to expand its presence in East Asia and the United States, given the attractive growth opportunities there. It has set up a new branch in Taiwan to support its foray into the market, following a design win for a new outsource semiconductor assembly and test company.

We project strong revenue growth for Aemulus, driven by a higher shipment of its Amoeba 7600 and 4600 testers on the back of resilient demand for RF components and enterprise storage. In addition, we expect another new tester, Amoeba 4900, to start contributing from FY17 ending Sept 30. Overall, we project a three-year earnings per share compound annual growth rate of 35%.

We initiate coverage on Aemulus with an “add” rating and 70 sen TP, based on 15 times calendar year 2017 price-earnings ratio, a 20% discount to global ATE peers’ average of 18 times to reflect its smaller market capitalisation. We believe its fundamentals are intact, given its strong product portfolio and highly experienced management team. —CIMB Research, Jan 27
[/size]