Aemulus down but not out with gradual expansion in China

Aemulus Holdings Bhd has been showing positive share price momentum. This was after the counter fell to a low of 24 sen in October following news of its loss-making unit in China. In the past month, the counter has gained some 19.2% to close at 31 sen on Dec 16,

The ACE Market-listed automated test equipment (ATE) manufacturer took a downturn in share price when it said it was taking full control of its loss-making Chinese associate company Tangming Shengshi Technology (Jiashan) Co Ltd (TMSS). This would be until the company can find new investors to turn around the firm.

Aemulus’ subsidiary Aemulus Corp Sdn Bhd (ACSB) has entered into an agreement with Tangren Microtelligence Technology (Jiashan) Co Ltd to acquire the remaining 60% stake in TMSS for 25 million yuan (RM15.05 million) cash.

By gaining full control in TMSS, Aemulus said it will be able to plan out the business direction of the company by having the flexibility to identify suitable investors.

The group said that upon completion of the acquisition, expected to be in the first quarter of 2025, its plans to increase TMSS' registered capital by up to 60% of the enlarged registered capital for subscription by third party investors.

The minimum capital to be raised by TMSS via the proposed increase in registered capital will be at least 62.5 million yuan. As a result, Aemulus' indirect shareholding in TMSS will be diluted back to 40% following the increase in registered capital.

On the selection of the investor(s), it said it will consider factors such as familiarity in semiconductor ATE industry in China and has the ability to widen the customer base of TMSS.

Other factors include assisting in the localisation of certain manufacturing inputs and/or processes as well as contributing to the growth and expansion plans of TMSS.

In 2020, Aemulus teamed up with Chinese technology company Tangren Microtelligence to form TMSS on a 40:60 basis, to enter the China market. TMSS is involved in the development and sales of semiconductor equipment and the provision of design consultancy services.

The company posted losses after taxation of 2.91 million yuan and 6.49 million yuan for the financial year ended Dec 31, 2022 (FY2022) and FY2023 respectively. Its total assets stood at 103.51 million yuan as at end-FY2023, while its liabilities totalled 73.83 million yuan.

Moving forward, Aemulus said that TMSS will expand gradually in China by establishing several key functions such as finance, procurement and research and development. With the good run in Aemulus share price, it appears that now is a good time to buy before it shoots up.