AEM & UMS: Any Upside Left After Explosive 1H 2026?

As expected, AEM Holdings (SGX: AWX) and UMS Integration (SGX: 558) delivered stellar 1H 2026 results, signalling that the semiconductor upcycle is firmly underway.

In case you missed the headline figures, AEM’s net profit rocketed 876% YOY to S$30.8 million, driven by a 29.9% increase in revenue to S$247.2 million.

Over at UMS, net profit jumped 66% YOY to S$33.4 million as revenue expanded 25% to S$156.5 million.

However, with share prices rallying sharply over the past six months, much of this initial recovery is now priced in.

Let’s look beneath these numbers to see if there is enough fundamental runway left to drive further upside.

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AEM: Harvesting the Fruits While Grooming New Plots

Strong Demand Momentum

AEM dropped another bombshell by raising its full-year revenue guidance for the second time this year — now expecting S$630 million to S$680 million for FY 2026, with Earnings Per Share (EPS) projected between S$0.245 and S$0.275!

It completely blows past earlier analyst estimates that were hovering around the S$0.20 mark.

This signals undeniable underlying demand, undergirded by fresh orders for its flagship AMPS platform from both its AI/HPC fabless customer and its core PC/Foundry accounts.

With the group’s order backlog stretching beyond S$400 million as of the results announcement, the near-term outlook is bright.

Confident in Management’s Execution

If you have been following AEM, management has shared repeatedly in the past that the Group’s new fabless AI/HPC customer would eventually contribute significantly.

That promise materialised fully this half: the new fabless AI/HPC customer has officially become AEM’s largest revenue contributor for the period.

This track record builds immense confidence in management’s forward guidance.

It’s not just for short-term numbers, but also for its upcoming expansion into the Memory segment (with its first final test handler shipping in 4Q 2026) and its strategic collaboration with OSAT giant ASE Technology (TWSE: 3711).

Growth isn’t going to appear overnight across all fronts, but the trajectory is clearly established. As cliché as it sounds: it is no longer a question of if, but when.

Increasing Recurring Revenue: The Real Game Changer

What stands out as a genuine structural game changer is the 12.6% sequential increase in device-specific configurables and collaterals, reaching S$72.3 million in 2Q2026.

AEM’s business works on a “razor and blades” model. Selling a test machine (the razor) is just the entry point. The real money comes later from high-margin consumables like test sockets and contactors (the blades).

These generate steady, recurring sales driven by non-stop operational wear-and-tear, alongside big structural surges every time a client upgrades their chip architecture.

With collaterals now accounting for 78% of Test Cell Solutions (TCS) revenue, AEM has built a highly reliable recurring revenue engine.

This means when this cycle eventually peaks, AEM is far less likely to face the severe revenue cliff drop it experienced in 2023. Any cyclical downturn will be much more palatable.

UMS: Similar Strong Underlying Demand

It is a remarkably similar story at UMS Integration.

Driven by scaling orders from its new key customer, UMS delivered robust sequential growth in 2Q 2026, with revenue climbing 26% QOQ to S$87.1 million and net profit jumping 39% QOQ to S$19.4 million.

While management doesn’t issue explicit numerical targets like AEM, it takes very little reading between the lines to see that 2H 2026 is set up to be even stronger.

In the latest press release, CEO Mr. Andy Luong emphasised that earnings haven’t peaked yet.

UMS continues to qualify a suite of New Product Introductions (NPIs) for its new key customer while expanding its manufacturing footprint across Penang and Vietnam.

Furthermore, as highlighted in a recent DBS analyst report, plant utilisation currently sits at around 50% (against a full-capacity target of ~80%).

This means sequential growth in the second half won’t be constrained by physical capacity bottlenecks. With even more capacity coming online over the next few years, this growth runway is set to last for some time.

Is There Any Upside Left?

That depends on what you are looking at and your investment horizon.

From an operational perspective, the demand momentum across the local semicon supply chain is undeniable.

Beyond AEM and UMS, you saw this in Venture Corporation’s (SGX: V03) latest update, and I expect similar structural tailwinds when Micro-Mechanics (SGX: 5DD) reports its full-year results this Wednesday.

Looking upstream, global giants continue to report expanding order backlogs, pointing toward a multi-year buildout driven by AI infrastructure, advanced packaging, and HBM memory expansion.

Barring a sudden macroeconomic shock, expecting earnings growth to extend well into 2028 before seeing any signs of a peak isn’t overly optimistic.

Stock Price: A Different Story

It’s a slightly different picture when evaluating current valuations. At recent prices, neither stock comes cheap based on near-term earnings:

• AEM (at ~S$9.36): Using management’s mid-point EPS guidance of S$0.26, AEM trades at a forward P/E ratio of ~36x.
• UMS (at ~S$2.77): If we assume 3Q and 4Q EPS step up by 15% over 2Q, full-year EPS approaches ~S$0.09, putting the stock at a forward P/E ratio of ~31x.

However, if you believe that this isn’t a normal semiconductor cycle, but a multi-year runway powered by the AI infrastructure buildout, there could still be further upside despite steep valuations today.

Sustained top-line growth and operating leverage mean earnings could continue to surprise to the upside, resulting in solid total returns, bolstered by an expanding dividend stream.

Why I Might Still Trim

I belong to this bullish camp, and I remain optimistic that this demand will continue to flow down to local precision manufacturers for a sustained period.

That said, with no fresh funds entering my portfolio at this stage, risk management and rebalancing take precedence over pure growth.

While my core intention is to hold my stakes in both companies, I may trim the froth off the top if market enthusiasm pushes valuations higher.

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