Target
AEM's Target in Year 2021 is SGD550mil and they able to hit the target.
Company has provided Year 2022 target between S$670 million to S$720 million.
Let's look at financial Yr 2021 results.
Income Statement
In 1H2021, company has mentioned that there are strong uptick on year 2H2021 and from the revenue we can see that it is a fact. Integrity and honesty are always the most expensive thing in the world.
In Yr 2021, company able to achieved 565mil revenue but not to forget some of this revenue contributed by CEI that recently acquired. Nonetheless, company able to generate gross profit of 186mil which 12 percents higher than FY2020.
From the income statement, we can clearly see that company is heavily invested in R&D which is about 10percent of Gross Profit. Hence, the net profit for this year is lower than last year about 6percent. Hopefully with 10percent of investment in R&D can get a better return for Yr2022.
High SG&A is due to transfer and professional fees of acquisition of CEI.
Balance Sheet
Looking at the balance sheet, the 1st thing 1st I will look at intangible assets or goodwill. Intangible or goodwill shouldn't more than 30percent of Total assets. Company has about 13 percent of intangible assets against Total assets.
Inventories jump significantly and company explained that inventories increased due to the consolidation of CEI Limited and higher inventory holdings at year-end
to meet anticipated increase in production and sales volume.
Trade and receivable increase significantly, it is a warning if the TR keep increasing. But looking at the Trade payable, it also increase significantly. With this, it should not have cash turn around issue.
From Balance sheet, we can see that the company is net cash company.
Cash Flow
Company able to generate positive cash flow. With termasek private placement, company has extra cash on hand to acquire ATECO and buy assets.
Calculation
Let's do a quick calculation, assume net profit margin is 15.5%
SHE - 301,889,000
Revenue - 670 and 720 mil
Net profit - 104mil and 127mil
EPS - 0.34 and 0.42
Today price - SGD 4 (7 Mar 2022)
Price / EPS = 4 / 0.34 = 11.7 and 4/0.42 = 9.5
ROE = 104 mil / 402,514,000 = 25 and 127 mil / 402,514,000 = 31
Undervalue stock.
