SINGAPORE TECH ENGINEERING LTD (SGX:S63)
ST Engineering - On The Recovery Track With Good Support
- 1H21 results slightly better than expected.
- Additional S$100m government support in 2021, bringing total to about S$200m.
- Interim dividend of S$0.05, same as last year.
ST Engineering reported good set of 1H21 results
- ST Engineering (SGX:S63) reported slightly better than expected results with net profit rising 15% y-o-y to S$296m, driven by stronger underlying performance in the Urban Solutions & Satcom and Defense & Public Security segments, partially offset by lower Commercial Aerospace contributions and government support.
- An interim dividend of S$0.05 per share was declared, which is flat y-o-y.
Segmental updates
- In 1H21, Commercial Aerospace recorded 10% y-o-y revenue drop due to a high base effect (recall that 1Q20 was not really impacted by COVID-19). Excluding government grants, EBIT declined by more than a third (~S$25m), but due to government support, headline EBIT rose 37% to S$103m.
- The Defense & Public Security division was the largest earnings contributor at 68% of group EBIT and remained resilient.
- The Urban Solutions & Satcom segment saw a significant improvement, with EBIT rebounding from a S$21m loss in 1H20 to a positive S$11m in 1H21.
Additional government grants
- ST Engineering expects to receive an additional S$100m in government support in 2021, taking government support to S$200m for the year. Do note that these figures include both Singapore and overseas government support, and are a result of a prolonged COVID-19 pandemic.
- Recall that ST Engineering recognised about S$350m worth of COVID-19 related government support in 2020.
S$1.8b contracts secured in 2Q21
- ST Engineering continues to win contracts, clinching S$1.8b of new contracts in 2Q21 and bringing its order book to S$16.8b, with S$3.6b expected to be delivered for the rest of 2021. This order book figure is already above pre-COVID-19 levels, providing earnings visibility forward.
- ST Engineering has been paying out dividends of S$0.15/share every year, which has been consistently the case for years now. We fine-tune our estimates and our fair value estimate for ST Engineering inches higher from S$4.30 to S$4.40.
- See
ST Enginering - ESG updates
- ST Engineering scores better than the payments, and provides ethics training to all employees.
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2021-08-13
SGX Stock
Analyst Report
4.40
UP
4.300
