Singapore Technologies Engineering’s (STE) 3Q16 revenue rose 7.5% YoY to S$1613.0m, mainly driven by higher revenue from the Aerospace and Electronics sectors. However, group PBT fell 31.1% YoY to S$106.6m, dragged by net loss at its Land Systems sector, as a result of a S$61.1m one-off charge consisting of an impairment of asset carrying value and provision for closure costs for its road construction equipment business in China.

Marine and Electronics and “Others” sectors reported higher PBT while Aerospace sector recorded comparable PBT. Consequently, 3Q16 PATMI plunged 42.5% YoY to S$76.7m. Excluding impairment charge, PATMI would have been 3.4% higher at S$137.8m.

For 9M16, revenue grew 6.7% YoY to S$4863.4m, while PBT fell 12.2% to 407.3m, which is in line with its previous guidance of a lower YoY PBT for FY16. 9M16 PATMI declined 19.1% to S$314.1m, but excluding one-off charge, core PATMI was only 3.4% lower at S$375.2m, meeting 76.8% of street’s FY16 estimates.

Pending more details at the analyst briefing later, maintain HOLD but put our S$3.13 fair value under review for now.

Source: OCBC Research - 10 Nov 2016