UOBKayhian on 12 June 2014
FY14F PE (x): 19.8
FY15F PE (x): 19.2
STE derives 26% of its revenue from the US, via aerospace and shipbuilding activities
and speciality vehicles sales. Growth out of the US was relatively lacklustre in 2013 as
contracts were scaled back as corporates and municipalities weighed in the impact of
US Government shutdown and tapering by the Fed. Consequently, US asset turnover
declined to 2.5x, the lowest in four years. However, this should reverse in the coming
quarters as the US economy is finally showing clearer signs of economic progress.
Maintain BUY. We maintain our S$4.50 target price and continue to value STE at
22.0x 2014F earnings or +1SD to long-term mean. DCF valuation also provides a
similar target price at S$4.50. At our fair value, STE will be trading at 1.0x orderbook.
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