ST Engineering (STE) has lowered its FY14 guidance as it now expects revenue and PBT to be “comparable” to FY13, versus an earlier guidance of higher growth. Management attributes the change to a likely weaker-than-expected performance from its Marine business. It was also the main reason behind the 0.1% fall in revenue and 10% slide in net profit in 1H14. Nevertheless, STE has declared a higher interim dividend of S$0.04/share, versus S$0.03 a year ago. In view of the latest results and change in guidance, we pare our FY14 estimate for revenue down by 4% and earnings by 6%; this also results in our fair value easing from S$3.84 to S$3.68 (now based on 19x blended FY14/FY15F EPS versus just 19x FY14F EPS previously). Maintain HOLD as forecast dividend yield of 4.0% still looks relatively attractive.
Slightly below guidance
ST Engineering (STE) reported its 2Q14 results this morning, with revenue coming in at S$1586.4m, -0.7% YoY, after Land Systems saw lower sales due to fewer deliveries in the Automotive segment; Aerospace, Electronics and Marine registered growth of 6-12% YoY. But as all sectors except for Electronics recorded lower PBT, net profit fell 10% to S$133.2m. 1H revenue eased 0.1% to S$3138.2m, meeting 44.7% of our full-year estimate, while net profit of S$270.4m (down 4.1%) met 43.1% of our FY14 forecast. STE declared a higher interim dividend of S$0.04/share, versus S$0.03 a year ago.
Main variance for the underperformance
According to STE, the main variance came from the Marine sector, which posted a lower PBT in 1H14 versus the comparable guidance, hit by weaker Shipbuilding performance from the US operation and lower Shiprepair revenue.
Lowers FY14 guidance
Going forward, STE expects to achieve higher revenue and PBT in 2H14 compared to 1H, backed by an order book of S$13.4b (as of end 1H14), of which about S$2.6b will be delivered in the second half. By sector, Aerospace revenue is likely to be comparable, while PBT will be higher; Electronics and Land Systems will see both higher revenue and PBT; Marine to see lower revenue but higher PBT. But for the whole of FY14, STE now guides for both revenue and PBT to be comparable to FY13, versus its earlier guidance of higher revenue and PBT for this year; this again due to the weaker-than-expected performance at its Marine segment. Note that STE defines “comparable” as +/- 5% growth.
Easing fair value to S$3.68
In view of the latest results and change in guidance, we pare our FY14 estimate for revenue down by 4% and earnings by 6%; this also results in our fair value easing from S$3.84 to S$3.68 (now based on 19x blended FY14/FY15F EPS versus just 19x FY14F EPS previously). Maintain HOLD as forecast dividend yield of 4.0% still looks relatively attractive.
ST Engineering (STE) reported its 2Q14 results this morning, with revenue coming in at S$1586.4m, -0.7% YoY, after Land Systems saw lower sales due to fewer deliveries in the Automotive segment; Aerospace, Electronics and Marine registered growth of 6-12% YoY. But as all sectors except for Electronics recorded lower PBT, net profit fell 10% to S$133.2m. 1H revenue eased 0.1% to S$3138.2m, meeting 44.7% of our full-year estimate, while net profit of S$270.4m (down 4.1%) met 43.1% of our FY14 forecast. STE declared a higher interim dividend of S$0.04/share, versus S$0.03 a year ago.
Main variance for the underperformance
According to STE, the main variance came from the Marine sector, which posted a lower PBT in 1H14 versus the comparable guidance, hit by weaker Shipbuilding performance from the US operation and lower Shiprepair revenue.
Lowers FY14 guidance
Going forward, STE expects to achieve higher revenue and PBT in 2H14 compared to 1H, backed by an order book of S$13.4b (as of end 1H14), of which about S$2.6b will be delivered in the second half. By sector, Aerospace revenue is likely to be comparable, while PBT will be higher; Electronics and Land Systems will see both higher revenue and PBT; Marine to see lower revenue but higher PBT. But for the whole of FY14, STE now guides for both revenue and PBT to be comparable to FY13, versus its earlier guidance of higher revenue and PBT for this year; this again due to the weaker-than-expected performance at its Marine segment. Note that STE defines “comparable” as +/- 5% growth.
Easing fair value to S$3.68
In view of the latest results and change in guidance, we pare our FY14 estimate for revenue down by 4% and earnings by 6%; this also results in our fair value easing from S$3.84 to S$3.68 (now based on 19x blended FY14/FY15F EPS versus just 19x FY14F EPS previously). Maintain HOLD as forecast dividend yield of 4.0% still looks relatively attractive.
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