Enterprise artificial intelligence (AI) is another re-rating thesis, with STI sales per employee up by 38% from 2021 to 2025, despite the total number of employees falling by 31%. “We believe this is partly from automation and AI,” he says. “As government enterprise AI initiatives accelerate, we expect more operating leverage to drive earnings upgrades.”
That said, lacklustre IPOs remain a key risk, with 60% of IPOs in the past year trading below their opening price. “This may create contamination risks for future listings and also impact secondary market velocity,” says Wickramasinghe.
His new target, which is pegged to a five-year mean forward P/E multiple of 17.1 times or +2 standard deviations (s.d.), more accurately reflects market cyclicality. It also reflects fundamental earnings upgrades and downgrades, as well as value unlocking from market reforms.
“Our bull and bear case scenarios are pegged to comparable developed market and regional exchanges that are undergoing reforms or offer similar dividend yield,” he adds.
Maybank’s bull target, pegged to a forward P/E multiple of 21 times, is 6,800 points, while its bear target, based on a forward P/E multiple of 15.8 times, is 5,100 points.
Despite the downgrade, the analyst believes FY2026 could see another new high for the STI across all of his scenarios after the index closed at a historical high of 4,646 points in 2025.
