AEM (SGX:AWX) said it discovered a shortfall in inventory which is estimated to be around 5-7% lower than earlier calculated at its Sept 2023 inventory close of S$358.6m. This was due to a human data entry error in transactions through its ERP system during the migration of production.
Headwinds from data error and slow recovery
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We cut our FY23/24 PATMI forecasts for AEM by -232% and - 34% respectively. While we believe the worst is over for AEM, we now see a substantial recovery only in FY25E.
We are also disappointed by the internal processes which led to such a basic error. As such, we downgrade AEM to HOLD with a lower target price of S$3.26 (from S$3.76) based on a lower blended 13.0x FY24/25E P/E from 13.5x.
Human data entry error led to inventory shortfall
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Management has put in place a new team after its COO left and is currently improving its internal inventory, stock monitoring and tracking systems.
We expect an S$18-25m impairment in AEM's FY23E results, likely leading to a loss.
FY24E recovery muted, high hopes for FY25E
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
