UOBKayhian on 14 Aug 2014
FY14F PE (x): 20.4
FY15F PE (x): 19.5
Steep decline in PBT from the Land Systems and Marine divisions have eroded
confidence. Management maintains that the decline of the Marine division is not
indicative of systemic pressures. Still, the guidance for flat PBT leaves little to be excited
about in the near term.
Downgrade to HOLD. We had previously valued STE at 22X 2014F earning or +1SD to
long-term mean, deriving a target price of S$4.50. We now peg our value at 20x
earnings, close to long-tem mean of 19.3x and derive a fair value of S$4.00. We thus
lower our rating on STE to HOLD. Suggested entry price is S$3.65.
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