• ST Engineering is a long-term stock to keep. Post its briefing, we are slightly more positive and see its respective divisions on track for steady growth via new investments/products.
• 2Q18 net profit of S$117m missed our S$130m forecast due to one-off interest for early redemption of US$500m bond and weaker-than-expected Miltope performance.
• Aerospace was the star with 26% y-o-y growth in 2Q profit, lifted by S$9m of divestment gain and sustainable upcycle of stronger repair for CFM engines.
• Electronics is milking the smart nation, cyber security and urbanisation trend, with a 20% y-o-y growth in profit. Aero and Electronics made up > 80% of ST Engineering’s 2Q profit.
• DPS of S$0.05 (flat y-o-y) was declared. Maintain ADD and S$3.80 Target Price.

Source: CGS-CIMB Research - 08 Aug 2018