ST Engineering - OCBC Investment 2016-02-26: FY15 results in line; Steady FY16 Outlook

ST Engineering - OCBC Investment 2016-02-26: FY15 results in line; Steady FY16 Outlook ST Engineering SINGAPORE TECH ENGINEERING LTD S63.SI 


  • FY earnings just 0.5% above forecast 
  • Orders of S$11.2b; S$3.8b for FY16 
  • Likely to sustain S$0.15 dividend 

FY15 results in line with expectations 

  • Singapore Technologies Engineering (STE) reported its FY15 results this morning, which came in within our expectations; revenue slipped 3.1% to S$6335.0m, about 0.9% below our forecast, while PATMI edged 0.5% lower to S$529.0m, but 0.5% above our estimate. 
  • STE has declared a final dividend of 5 S cents as well as a special dividend of 5 S cents, bringing the total FY15 payout to 15 S cents, unchanged from FY14. 

Also better than guidance 

  • While results were in-line with our forecast, management highlighted that FY15 PBT was actually “comparable” to FY14, versus its guidance of “lower”; this mainly due to favourable fair value movement of CCIRS (cross currency IRS) and lower-than-forecasted expenses. 
  • Management added that the PBT for Land Systems was also higher in FY15, versus its comparable guidance, aided by higher revenue and lower expenses than forecasted. 
  • Otherwise, the other segments performed as per its guidance. 

Guides for steady FY16 outlook 

  • Going forward, STE expects to see higher revenue for the group in FY16, although PBT is likely to remain comparable to FY15. 
  • In particular, management sees higher revenue for both Aerospace and Electronics sectors, with both PBTs to remain comparable. 
  • For Land Systems, revenue is expected to be comparable; but with lower PBT. 
  • Lastly for Marine, revenue should be higher, but lower PBT than FY14. 
  • Meanwhile, with S$1.2b worth of new orders won in 4Q15, STE revealed that it now has about S$11.7b of order backlog as of end 2015, of which it expects to deliver about S$3.8b in 2016; this should cover about 60% of our full-year estimate. 

Maintain BUY with new S$3.24 fair value 

  • Taking into the latest guidance, we have modestly raised our FY16 estimates by around 1%; and this in turn bumps up our fair value from S$3.22 to S$3.24, still based on 19x FY16F EPS. 
  • We believe that STE is likely to retain a similar dividend payout of 15 S cents for this year, which translates to a fairly attractive yield of 5.3%. Maintain BUY.

Carey Wong OCBC Securities | http://www.ocbcresearch.com/ 2016-02-26
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 3.24 Up 3.22