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

ST Engineering SINGAPORE TECH ENGINEERING LTD S63.SI

ST Engineering - FY15 RESULTS IN-LINE; STEADY FY16 OUTLOOK

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.

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.

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.

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