• At 39% of our full-year forecast, we deem Sunningdale’s 1H18 net profit in line assuming 2H seasonality and US dollar strength holds.
• A higher interim DPS of 3.0 Scts was declared (1H17: 2.5 Scts).
• Key one-off items in 2Q18 results were S$3.8m FX gain and S$1.0m start-up loss at its new Penang plant.
• We are concerned over the gross margin trend and have cut our FY18-20F gross margin assumptions. We subsequently cut our FY18-20 EPS forecasts and Target Price.
• Maintain ADD. Our target price of S$2.05 (previously S$2.50) is based on 1.02x FY18 P/BV (previously 1.23x FY18 P/BV), as ROEs decline.

Source: CGS-CIMB Research - 08 Aug 2018