The outlook remains challenging. Despite the YoY higher 2Q18 PATMI, margins continue to compress, and PATMI came in lower than our expectation. Absence of strong catalyst will keep the share price muted, in our view. However, SIAEC has a strong balance sheet with a net cash position, which it is utilising to start new ventures.
Upgrade to Neutral (from Reduce); lower target price of S$3.35 (previously $3.70)
We have incorporated 1H18 results into our FY18e estimate, and made some adjustments to our margin assumptions and profit contribution from associates/JVs. Our FY18e/FY19e PATMI is now 8.6%/14.9% lower than previous estimates. We have also lowered our FY18e/FY19e ordinary dividend forecast to 12.0/12.5 cents from 13.0/14.5 cents previously
Our target price gives an implied FY18e forward P/E multiple of 24.6x. This compares against the STI next 12-months forward P/E multiple of 15.0x.