ST Engineering - OCBC Investment 2019-11-11: Core Business Remains Strong

SINGAPORE TECH ENGINEERING LTD (SGX:S63) | SGinvestors.io SINGAPORE TECH ENGINEERING LTD (SGX:S63)

ST Engineering - Core Business Remains Strong

  • Continues to secure contracts.
  • Record high order book of S$15.9b.
  • Clear outperformer, but upside may be diminishing.



12% y-o-y rise in 3Q19 core net profit

  • ST ENGINEERING (SGX:S63) posted a 27% y-o-y rise in revenue to S$2.1b and a 3% increase in net profit to S$139.1m in 3Q19. See ST Engineering Announcements.
  • Excluding the provision of S$14.2m before tax made for the arbitration outcome with Hornbeck Offshore Services as announced on 23 Oct 2019, the group’s net profit would have been up 12% y-o-y at S$150.3m. 9M19 net profit would have been S$419.4m, accounting for 72% of our earlier full year estimate.


Aerospace the outperformer, supported by MRAS

  • On a segmental basis, ST Engineering's net profit in the
    • Aerospace division rose 17% y-o-y to S$65.0m;
    • Electronics was down 7% at S$51.5m largely due to increased investments in new growth areas;
    • Land Systems was 14% lower at S$15.1m with the absence of a favourable tax credit in the prior year, while
    • Marine’s net profit would have been 14% higher at S$14.6m should the amount for the arbitration outcome be excluded.


Continues to secure contracts

  • ST Engineering announced a total of S$1.8b worth of new contracts in 3Q19, of which S$1.0b was from the Aerospace sector for a spectrum of aviation manufacturing and services including multi-year MRO agreements for both defence and commercial customers, engine nacelle component and floor panel manufacturing.
  • Out of S$1.8b, S$833m was from the Electronics sector, received from global customers for satellite communications, mobility, public safety and security, Internet of Things, training and simulation, cybersecurity and defence solutions.


ST Engineering a clear outperformer






OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-11-11
SGX Stock Analyst Report BUY MAINTAIN BUY 4.640 SAME 4.640



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