Singapore Technologies Engineering (STE) delivered a 2.7% YoY rise in revenue to S$6.7b and a 1.7% fall in net profit to S$494m in FY18, compared to ours (S$532m) and the street’s (S$539m) expectations. Excluding one-off charges of S$37m before tax, net profit would have been 9% up at S$527m, which would have been in line with our expectations.

The decrease in net profit mainly arose from the Land Systems division (-34.5% to S$52.9m), partially offset by higher contribution from Electronics (+17.7% to S$186.5m) and Marine (+18.2% to S$45.2m).

A final dividend of 10 cents has been declared, bringing the full year dividend to 15 cents, which is the same as a year ago. Pending an analyst briefing, we maintain our BUY rating but put our fair value estimate of S$3.95 under review.

Source: OCBC Research - 21 Feb 2019