UOBKayhian on 8 Nov 2013
(STE SP/SELLS$4.20/Target: S$3.65)
FY13F PE (x): 22.6
FY14F PE (x): 22.5
Tapering blues hit revenue; expect a weaker 4Q. Revenue grew a paltry 0.5% yoy in 3Q13 (2Q13: 2% yoy) and STE attributed the decline on “pessimistic business sentiment due to speculation of the US's QE tapering, along with a challenging European environment and softening of the China economy ". The marine segment saw the best growth (+25% yoy) and offset the decline at land systems (-11% yoy). Revenue out of
Europe fell 21% yoy, while that out of the US fell 8% yoy. 9M13 net profit is clearly below expectations as consensus full-year net profit implies a 33% yoy growth in net profit for 4Q13. Orderbook declined for the second consecutive quarter to S$12.5b vs peak orderbook of S$13.0b.Downgrade to SELL; lower target price by 7% to S$3.65. Despite a record orderbook, STE is impacted by the political gridlock in the US and economic malaise in Europe and China. Given the heightened risks, we downgrade the stock to SELL and lower our target price by 7%. Our target price is DDM-based with a required rate of return of 6.6% and terminal growth of 1.5%.
No comments:
Post a Comment