ST Engineering - Strengthening capability in ICT segment
- Singapore Technologies Engineering (STE) recently announced that its electronics arm, ST Electronics, is acquiring 51% equity stake in SP Telecommunications (SPTel) from Singapore Power (SP) for ~S$54m, which will be finalized post-closing, subject to a maximum of S$60m.
- The transaction will be fully funded by ST Electronics’ internal cash and is expected to close by 2Q17.
- SPTel owns, builds and operates communication and infrastructure services in Singapore, and it also owns an extensive network of fibre optic back-haul infrastructure and facilities. In our view, this proposed acquisition will strengthen ST Electronics capabilities in Info-Communications Technology (ICT) segment, which is in-line with its strategy to drive growth ahead in this area.
- We believe this acquisition of ICT-related infrastructure allows ST Electronics to be better poised to provide ICT solutions for enterprise customers, and is also in-line with Singapore’s vision to become a smart nation.
- All said, we do not expect this acquisition to have any material impact in the near-term. Hence, keeping our forecasts unchanged for now, maintain HOLD on STE with an unchanged FV estimate of S$3.20.
- STE is expected to announce its FY16 results on 16 Feb 2017 before trading hours.