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Singapore Technologies Engineering - Orderbook Hits New High

kiasutrader
Publish date: Fri, 28 Feb 2014, 03:11 PM
STE's 4Q13 PATMI of  SGD167.5m (+10.0% y-o-y), earned  on the back of SGD1.94bn  in  revenue  (+12.1%  y-o-y),  was  slightly  below  expectation.Its orderbook reached  a new high of SGD13.2bn, of which SGD4.3bn is expected to be delivered in FY14.  Elsewhere, the outlook  for  all  of its divisions, except land systems, is positive. Maintain BUY, with our DCFbased TP raised to SGD4.66 (WACC: 8.4%; growth: 0%).
  • Aerospace  unit  to  perform.  Singapore  Technologies  Engineering (STE)'s  aerospace  unit  reported  a  PBT  of  SGD88.2m  (+14.4%  y-o-y)and  revenue  of  SGD590.6m  (+4.3%  y-o-y)  in  4Q14.  The  contracts announced  in  4Q13  exceeded  SGD780m,  bringing  the  announced contract  value to SGD2.3bn  in total.  Going forward, the group's  revenue is  likely to be higher,  with comparable profits,  as  its  new operations in Guangzhou and Texas take time to ramp up while incurring  more costs during their start-up periods.  Its  investment  pact  with  Pensacola  city  in the US to develop a new airframe facility, as well as the initial portfolio of its aircraft leasing business, are expected to be finalised in FY14.
  • FY14 a better year for electronics,  marine  units.  During the quarter, the electronics division reported a PBT of SGD46.7m (+27.8% y-o-y) and revenue of SGD529.8m (+18.7% y-o-y), while  the  marine  unit  booked  a PBT of  SGD47.1m (+28.4% y-o-y) and revenue of SGD377.9m (+48.6% y-o-y). Going forward, both sectors are likely to report higher PBT and revenue in FY14, backed by a strong orderbook. But  downbeat  on  land  systems.  The  land  systems  unit's  strong turnaround  in  4Q13  -  with  11.3%  and  126.4%  q-o-q  jumps  in  revenue and  PBT  respectively  -  was  due  to  a  one-off  gain  from  a  property disposal. Still, its near-term outlook  remains sluggish as macroeconomic conditions remain volatile and spending on capital equipment delayed.  
  • Dividend  payout  ratio  drops  to  80%.  While  STE's  historical  dividend payout  ratio  was c.90%  of  profit,  FY13's  final dividend of SGD0.12  was only  80%  due to  a  30% withholding tax  at  its businesses overseas  that restricts  the flow of  cash  back  to shareholders.  Hence,  the  payout  ratio will likely drop to 75%  as the group aims  to retain  its overseas  earnings to grow its businesses.





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Company Profile
ST  Engineering  is  a  Singapore-homegrown  engineering  group  specialising  in  solutions  and  services  in  the  Aerospace,  Electronics, Land Systems and Marine sectors.

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Source: OSK-DMG
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