Singapore Technologies Engineering (STE) reported 1Q16 revenue of S$1623.3m, +5.1% YoY, where higher revenue from Aerospace and Electronics sectors were partially offset by lower revenue from Land Systems and “Others”; Marine reported comparable revenue. Group PBT came in at S$170.3m, +11.8%, aided by higher PBT from Electronics and Land Systems segments, but were mitigated by lower PBT from Marine; Aerospace recorded comparable PBT while "Others" saw a lower loss. PATMI inched up 1.8% to S$127.3m.

All in, 1H16 revenue grew 6.3% to S$3250.4m, meeting 49% of our fullyear forecast, while PBT came in S$300.7m, down 2.7%, which STE deemed to be "comparable" versus its guidance of a lower PBT (>5% drop). PATMI fell 6.9% to S$237.5m, meeting 45% of our FY16 estimate. STE declared an interim dividend of S$0.05/share, unchanged from 1H15.

Going forward, STE expects 2H16 revenue to be higher, while PBT is expected to be lower than that of 1H16. For FY16, group expects higher revenue but lower PBT; this versus its previous guidance of comparable PBT. We will have more after the analyst briefing later.

Meanwhile, our BUY call and S$3.24 fair value are both under review for a possible downgrade.  

Source: OCBC Research - 15 Aug 2016