ST Engineering

PHILLIP SECURITIES RESEARCH on 15 Aug 2012

ST Engineering recorded profit growth of 9.7 per cent driven by higher sales from all segments except Aerospace. The group's Ebitda margin was stable at 12.9 per cent (Q2 FY11: 12.6 per cent, Q1 FY12: 11.8 per cent). STE's order book reached a record high at $12.7 billion (2.1x sales) after accounting for contract wins of circa $2.1 billion in the quarter. Management reaffirmed guidance for higher revenue and profit before tax (PBT) for estimated FY12. Interim dividend of 3.0 cents was declared.

Even after adjusting for the $13.2 million one-off gain on divestment of properties, STE's underlying profit was strong with PBT growth of 4.4 per cent. Core segmental performance for H1 FY12 remains on track to meet our full-year estimates.

We tweaked our forecasts to adjust for the one-off gain on divestment of properties and maintain our "accumulate" rating on STE. The stock's earnings multiples remain below historical average at 18.5x estimated FY13.
ACCUMULATE