Singapore Technologies Engineering (STE) reported its 1Q16 results this morning. Revenue of S$1,627.1m (+8% YoY) was in line with our forecast (meeting 25% of FY16 estimate); STE saw higher revenue from Aerospace (+27%) and Electronics (+28%), but mitigated by lower revenue from Land Systems (-18%) and Marine (-24%).

However, PBT slipped 13% to S$130.4m and PATMI dropped 15% to S$110.2m, both meeting 21% of our full-year forecasts, hence slightly weaker than expected; PBT for Aerospace was comparable and Electronics +13%, but Land Systems dropped 28% and Marine tumbled 85%.

Nevertheless, management has kept its FY16 guidance unchanged, with revenue likely to be higher and PBT to be comparable to FY15; this likely supported by its healthy S$11.5b order book and cash balance of S$1.5b. We will have more after the analyst briefing later.

For now, we keep our HOLD rating but place our S$3.24 FV under review.

Source: OCBC Research - 13 May 2016