ASEAN FIRST TO MARKET

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ASEAN FIRST TO MARKET

Asia Pacific Equity Research

ASEAN First to Market 31 July 2026

Top Stories

| ST Engineering (Karen Li, CFA) (STE SP, N, PT S$11.20), Singapore

From tailwinds to proof points - A&D global read-throughs; 1H26 preview, d/g to Neutral

Global read-throughs are turning more consistent than investors anticipated: even with unresolved geopolitical tensions and

still-supportive structural drivers, many defense stocks including Rheinmetall, Hyundai Rotem and KAI have struggled to

sustain momentum as the market shifts from paying for “upcycle exposure” to paying for visible order conversion, clean

margins and cash return visibility. Aerospace read-throughs look comparatively more constructive when management teams

anchor medium-term outcomes and reinforce cash conversion credibility, which is why the tone around Airbus and MTU Aero

has been more resilient than much of the defense peer set. Against that backdrop, we are downgrading STE to Neutral while

keeping our fundamental view unchanged: the multi-year compounding setup remains intact, but valuation and expectations

now leave less room to surprise on the upside near-term. In the latest global comp context, STE trades at 30.5x/25.4x

FY26/27E P/E with +28% YTD performance, broadly in line with the Asia defense avg of 30.9x/24.8x and slightly above the

Europe defense avg of 29.4x/23.7x, which suggests c.20% recurring earnings delivery is already heavily discounted and the

hurdle to beat is high. If a miss, or even an in-line print without upside momentum, triggers a meaningful pullback, we would be

buyers on dips.

Jardine Matheson (Karl Chan) (JM SP, OW, PT $94.00), Hong Kong, Singapore

First Take: 1H26 earnings beat; JC&C’s special dividend may have broader implications