✨ AEM Holdings - Supplying the Lockheed Martin of Tomorrow (Part 2)
An Intel proxy that fits the Buffett quote: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
50% of AEM Holdings’ historical revenue is recurring in nature - as an Intel proxy, it is poised to benefit from the upcoming geopolitical wars as explained in Part 1.
While AEM’s semiconductor testing industry has historically been a commoditized one, this is beginning to change due to the engineering limits of Moore’s Law at the leading-edge - and AEM is perfectly poised to capture a slice of the pie amidst industry disruption.
Singapore’s sovereign wealth fund Temasek recently acquired a 10% stake in AEM - with a former Applied Materials veteran who worked there for 23 years serving on its management team.
It is possible to draw a parallel between AEM today and early Netflix - where the latter managed to leapfrog its legacy Cable competitors by demonstrating strategic foresight in a disrupted industry, eventually becoming their equal.
When we last left of in the AEM Part 1 report, we saw that AEM Holdings was a key supplier of advanced semiconductor testing equipment to Intel. In this AEM Part 2 report, we shall be doing a deep-dive into their business to explore why this tiny Singaporean small-cap (USD 1.1B mkt cap) has such a bright future before it - by virtue of riding on the seismic geopolitical wave that Intel is expected to conjure.
If you recall, we discussed in my earlier AEM Part 1 report how Intel represents the Lockheed Martin of Tomorrow - given its outsized significance to the Western hemisphere’s geopolitical objectives. It’s not everyday that you get to write about the equivalent of a James Bond villain’s plan for world domination - but that’s exactly what Intel’s newly announced IFS division represents to all Western governments today.
Just to recap, Intel Foundry Services (IFS) is where Intel makes its semiconductor foundries accessible to third-party fabless companies like Apple and NVDIA, for the latter group to outsource their semiconductor manufacturing to. Given Intel’s highly strategic location in the USA as compared to its peers (Taiwan’s TSMC and South Korea’s Samsung), it is the only horse in the race worth betting on now as far as the Western governments’ are concerned. And if Intel can do well, so can everyone involved in its colossal supply chain spanning the entire globe - including little old AEM Holdings.
If you’d like to understand the Intel story a little better (and why it might be a Buy at its current 10x trailing PE), head over to my AEM Part 1 report where I paint how the macro thesis alone more than justifies the presented risk:reward. I might consider doing a deep-dive of Intel itself one day given its massively asymmetric risk:reward profile - but for today, we’re going to focus on one of its key suppliers, AEM Holdings.
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