SGX-listed AEM Holdings Limited (SG:AWX) will reduce its inventory value and pre-tax profits in the Q4 2023 results due to an identified shortfall in the group’s inventories. Last week, the company revealed an inventory shortfall following an internal stocktaking exercise. As per the latest update, the company attributed this shortfall to “human error in transactions,” defying the occurrence of any fraud or illegal activity.
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The company will announce its fourth-quarter results for 2023 in February 2024. AEM Holdings shares were 2.5% at the time of writing today. Last week, shares declined by over 8% in a day following the shortfall announcement.
AEM is a worldwide provider of semiconductor test solutions, covering multiple stages of testing for engineering and manufacturing units.
Inventory Woes
Yesterday, AEM Holdings confirmed the absence of evidence indicating “fraud, illegal activities, or physical loss of inventory.” The identified shortfall was mainly due to human error in transactions, which occurred during the transition of production from Singapore to the company’s Penang facility. During the transfer, data entry errors led to inaccuracies in the recorded amounts for inventory. These errors collectively caused an overstatement of inventory and profits within the system.
Consequently, the inventory value and profits will be adjusted downward by S$18 million to S$25 million in the Q4 2023 results. The company is actively working on finalizing year-end adjustments and will undertake changes to prevent such errors in the future.
What is the Price Prediction for AEM?
Analysts have mixed views on the stock and have recently confirmed their ratings. Analyst Sean Teo from J.P. Morgan reiterated his Buy rating on the stock, predicting an upside of 28%.
On the other hand, HSBC and Maybank analysts have downgraded their ratings from Buy to Hold with a forecast of around 15% upside in the share price.
According to TipRanks, AWX stock has a Moderate Buy consensus rating based on two Buy and three Hold recommendations. The AEM share price target is S$3.39, which is around 19% above the current trading level.
