• 2Q18 net profit was in line with expectations at 25% of our full-year forecast. 1H18 formed 47% of our full-year forecast.
• AEM has maintained its guidance for FY18. It expects its revenue/PBT to be at least S$255m/S$42m.
• AEM has also guided for headwinds and significant volatility in earnings for FY19. As such we slash our FY19-20F EPS forecasts by 61-64%.
• Interim DPS of 1.5Scts was declared. Net cash per share at end Jun-18 was S$0.17.
• We downgrade our rating from Add to REDUCE. Our Target Price is cut to S$0.69, still based on 10x FY19F EPS.

2Q18 Results in Line

We deem the 2Q18 results in line, with net profit at 25% of our full-year forecast. This was driven by a 17.8% y-o-y increase in revenue in the equipment systems business. 

One-off items in the 2Q18 results were minor. However, the effective tax rate of 17.6% was higher than we expected. 

1H18 net profit formed 47% of our full-year forecast. An interim DPS of 1.5Scts was declared.

FY18 Guidance Unchanged…

AEM announced that the group has to-date received sales orders worth S$235m for delivery in FY18. FY18 guidance of revenue of at least S$255m and PBT of at least S$42m was unchanged. 

AEM’s guidance implies that 2H18 PBT could fall 4.9% hoh and 8.2% y-o-y. Sales seasonality with peak quarters in 2Q and 3Q was also reiterated.

Source: CGS-CIMB Research - 31 Jul 2018