■ Bloomberg reported that Apple is looking to use its own chips for its Mac computers beginning as early as 2020.
■ Bloomberg estimates Apple contributes about 5% of its current chip supplier’s revenue.
■ We see the share price weakness as a buying opportunity as AEM’s major customer is already targeting new growth areas beyond the computing business segment.
Bloomberg article
● According to a Bloomberg news article, Apple Inc (AAPL US, Not Rated) is planning to
use its own chips in Mac computers beginning as early as 2020, replacing processors
from its current chip supplier.
● The initiative is still in the early developmental stages but comes as part of a larger strategy to make all of Apple’s devices – including Macs, iPhones, and iPads – work more similarly and seamlessly together.
● The initiative is still in the early developmental stages but comes as part of a larger strategy to make all of Apple’s devices – including Macs, iPhones, and iPads – work more similarly and seamlessly together.
● According to Bloomberg’s own analysis, this chip supplier generates about 5% of its
annual revenue from Apple.
What you should do ?
● We see the share price decline as a buying opportunity for new investors.
● As a reference, AEM’s recent vendor placement price was S$6.10.
● There are also no changes to AEM’s FY18 guidance of a pretax profit of at least
S$42m, which excludes the contribution from recent acquisitions.
● Maintain Add and target price, based on 10x FY19F EPS (17% discount to peer
average).
● Potential re-rating catalysts include stronger-than-expected customer orders.
Downside risks include order delays or cancellations.
