Singapore Technologies Engineering’s (STE) 4Q17 revenue fell 6.5% YoY to S$1702.3m, on lower revenues across all sectors except for Aerospace. In-line with 4Q17 revenue trend, STE’s PBT declined 5.3% YoY to S$173.5m with Marine sector posting a 96.8% plunge as losses from shipbuilding widened during the period.

Consequently, despite the weakness at Marine Sector, 4Q17 PATMI only fell 1.1% YoY to S$168.5m, on the back of higher PBT margins from Aerospace and Electronics sectors, as well as favourable impact from re-measurement of deferred tax balances due to US tax reform for Land Systems sector.

For FY17, revenue fell 1.0% YoY to S$6619.5m, as growth at Aerospace and Electronics sectors were offset by decline in Land Systems and Marine sectors. Stripping out oneoff items recorded in FY16, FY17 core PATMI declined 5.1% to S$511.9m but came in above our expectations as it formed 114.2% of our FY17 forecast.

A final dividend of 10.0 S-cent was proposed for FY17 (FY16 final: 10.0 S-cent), bringing the total dividend for FY17 to 15.0 Scents (FY16 total: 15.0 S-cents).

Pending an analyst briefing, we reiterate BUY but put our FV of S$4.00 under review for now.

Source: OCBC Research - 23 Feb 2018