Singapore Technologies Engineering (STE) announced last Friday that its aerospace arm, ST Aerospace, has secured new contracts worth S$520m in 3Q16. These projects range from line and airframe maintenance to component repair and overhauls. The total contract value includes the passenger-to-freighter conversion of four Airbus A330-300 for DHL Express as announced in Jul 16.

And among the line and heavy maintenance contracts was a five-year agreement with an international airline to provide heavy maintenance support for the airline’s B767 and B777 aircraft fleet. Recall that STE was sitting on an order book of S$11.6b as at end 2Q16, of which it expects to deliver about S$2.5b over 2H16.

That said, these new contracts are not expected to have material impact on STE for FY16. Maintain HOLD on STE, with an unchanged FV of S$3.13 for now. Note that STE is expected to announce its 3Q16 results before trading hours on 10 Nov 2016.

Source: OCBC Research - 17 Oct 2016