AEM dropped 38% over 3 days, many investors got hurt

AEM dropped 38% over 3 days, many investors got hurt

The 2017 top gainer stock has shocked many investors, as the recently plunged caught everyone off-guard.

AEM shown close to 500% gains in year 2017, with the top stock price rallying from $0.13 to $0.83. Earlier this year, we mentioned the top 3 hot stocks with the highest returns in 2017, with AEM as considered one of them. One of our users even made a million dollar holding AEM since vested 3 years ago before closing his position in Feb 2018, we have mentioned him in this post.

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CGS-CIMB downgraded AEM to a target price of $0.69 from $1.19, on 31 Jul 2018.  As of 10.33am, AEM was trading down 22.1 per cent, or 22 Singapore cents, to 77.5 Singapore cents apiece, amid heavy volume of some 18.9 million shares. That put it among the most active stocks.

The company’s stock has erased nearly all the gains it has seen since the start of 2018. It peaked at S$1.90 in mid-March.

As quoted from CGS-CIMB, AEM shown poor visibility for 2019.

2Q18 results are still in line with net profit of 25% their full year forecast. This was driven by a 17.8% yoy increase in revenue in the equipment systems business. AEM announced that the group has to-date received sales orders worth S$235m for delivery in FY18. FY18 guidance of revenue of at least S$255m and PBT of at least S$42m was unchanged.

AEM results 2Q18
It seems that AEM released great results of higher revenue and better profit margins but the stock dropped insanely with 38% in 3 days. The chart set up was climbing steadily and there was no profit taking, but instead of gapping up, it went south.

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De-rating catalysts include order pullback and cancellation by customer. Upside risks include consumable revenue gaining traction as the current equipment ramp-up phase at its customer ends. Management has also guided that it will strive to proactively manage its fixed costs in line with the volatility in its business. One of our user, @Hayashi8 agreed on a post, on the tech war industries, high inventories and increasing slower sales of mobile phones in 2nd half of 2017 is carried over to this year.

The shakeup makes Chinese importers (the target of US) realises that they have to be self reliant, and the pumping of not billions but hundreds of billions of USD into making their own chips. This aggravates the sales of Intel, Macron, etc.

The tech war is not helping. The tariff helps to raise prices, reduces productions, cuts sales to the world largest electronic consuming market from the US Electronic MNCs, and helps push China to make their own chips.This is BAD news as China when it becomes world number 1, will cut off American electronic companies from its market and companies that is in the supply chain for these American companies.

According to Straits Times, Hi-P, another contract manufacturer, lost 4.44 per cent, or six cents, to $1.29, recovering some of its losses from earlier in the morning, while precision machining firm UMS declined 4.12 per cent to 81.5 cents, inching up from its early morning dip.  Homegrown concern Creative continued to fall too, slipping 0.64 per cent, or four cents, to $6.17, while Venture Corp’s stock recovered from its earlier shock, advancing 1.81 per cent, or 30 cents, to trade at $16.88.

Another reason shown that the FANG stocks and Nasdaq got sold down heavily yesterday which caused the tech stocks here in Singapore to lose some confidence. Even though the tech stocks charts showed bullishness, but it spilled over from the oversold US tech market. Therefore there was some feared instilled causing the sell down.

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For more discussion about the current active tech stocks in Singapore (Click on the green view now button):

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