ST Engineering - OCBC Investment 2016-10-19: Recording a one-off S$61m charge in 3Q16

ST Engineering - OCBC Investment 2016-10-19: Recording a one-off S$61m charge in 3Q16 SINGAPORE TECH ENGINEERING LTD S63.SI

ST Engineering - Recording a one-off S$61m charge in 3Q16

  • Singapore Technologies Engineering (STE) announced last evening that it will be recording a one-off charge of ~S$61m for 3Q16 to write down investments in its 75.3%-owned Chinese subsidiary, Jiangsu Huaran Kinetics (JHK). 
  • JHK is a JV between STE’s land systems arm (ST Kinetics) and China’s state-owned enterprise Jiangsu Huatong Machinery, and it has started the process for the cessation of production from yesterday in order to reduce its operating loss. Hence, STE has also taken the prudent approach to record the charge, which consists of ST Kinetics’ net carry value in JHK and closure costs, given the likely scenario that production will cease. 
  • As this is a non-recurring and one-off charge to write-down a loss-making subsidiary, we are keeping our forecasts unchanged for now until 3Q16 results are announced before trading hours on 10 Nov 16. 
  • Maintain HOLD on STE, with an unchanged FV of S$3.13 (based on 19x FY17F EPS).




Eugene Chua OCBC Investment | http://www.ocbcresearch.com/ 2016-10-19
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 3.13 Same 3.130



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