Singapore Technologies Engineering (STE) reported FY12 results that were in line with ours and consensus expectations. For FY12, revenue rose 6% YoY to S$6.4b, profit before tax climbed 10% YoY to S$723m and profit attributable to shareholders rose 9% to S$576m. All sectors recorded higher PBT for FY12 versus FY11. Aerospace, Electronics, Land Systems and Marine saw PBT increase by 9%, 11%, 6% and 5% YoY respectively. Aerospace’s FY12 PBT margin of 15.0% improved over FY11's 14.4%. STE expects to achieve higher revenue and PBT in FY13 versus FY12. We forecast a FY13F EPS of 19.9 S cents, and keeping a P/E peg of 20.7x, we raise our fair value from S$3.90 to S$4.12 and maintain a HOLD on STE. We estimate a FY13F dividend yield of 4.5%.
FY12 results in line
STE reported FY12 results that were in line with ours and consensus expectations. For FY12, revenue rose 6% YoY to S$6.4b, profit before tax climbed 10% YoY to S$723m and profit attributable to shareholders rose 9% to S$576m. Allowance for doubtful debts and bad debt written off totalled S$22.3m, chiefly due to Land Systems in China. Some of the assets involved have been repossessed. STE is currently taking legal action and some write-backs may be seen later this year. Commercial sales accounted for 63% of revenue. Order book stood at S$12.1b as of end-2012 (3Q12: S$12.5b), of which S$4.3b is expected to be delivered in 2013. The 4Q12 figure excluded the recent newbuild contract for eight vessels for the Singapore Navy, which we estimate could be worth ~S$1.6b.
Aerospace FY12 margin improvement
All sectors recorded higher PBT for FY12 versus FY11. Aerospace, Electronics, Land Systems and Marine saw PBT increase by 9%, 11%, 6% and 5% YoY respectively. Aerospace registered a PBT margin of 13.6% for 4Q12, versus 16.8% for 3Q12 due to seasonal weakness (winter in the US) and Guangzhou start-up costs. However, FY12 PBT margin of 15.0% improved over FY11's 14.4%.
Outlook
STE expects to achieve higher revenue and PBT in FY13 versus FY12. For Aerospace, FY13 revenue is expected to be comparable to FY12 while PBT is expected to be higher. STE views the American Airlines-US Airways merger as neutral to slightly positive; cost control after merger could lead to more outsourcing. For Electronics and Marine, FY13 revenue and PBT are expected to exceed FY12 figures. For Land Systems, FY13 revenue is expected to be higher while PBT is expected to be comparable for FY12.
Maintain HOLD
We forecast a FY13F EPS of 19.9 S cents, and keeping a P/E peg of 20.7x, we raise our fair value from S$3.90 to S$4.12 and maintain a HOLD on STE. We estimate a FY13F dividend yield of 4.5%.
STE reported FY12 results that were in line with ours and consensus expectations. For FY12, revenue rose 6% YoY to S$6.4b, profit before tax climbed 10% YoY to S$723m and profit attributable to shareholders rose 9% to S$576m. Allowance for doubtful debts and bad debt written off totalled S$22.3m, chiefly due to Land Systems in China. Some of the assets involved have been repossessed. STE is currently taking legal action and some write-backs may be seen later this year. Commercial sales accounted for 63% of revenue. Order book stood at S$12.1b as of end-2012 (3Q12: S$12.5b), of which S$4.3b is expected to be delivered in 2013. The 4Q12 figure excluded the recent newbuild contract for eight vessels for the Singapore Navy, which we estimate could be worth ~S$1.6b.
Aerospace FY12 margin improvement
All sectors recorded higher PBT for FY12 versus FY11. Aerospace, Electronics, Land Systems and Marine saw PBT increase by 9%, 11%, 6% and 5% YoY respectively. Aerospace registered a PBT margin of 13.6% for 4Q12, versus 16.8% for 3Q12 due to seasonal weakness (winter in the US) and Guangzhou start-up costs. However, FY12 PBT margin of 15.0% improved over FY11's 14.4%.
Outlook
STE expects to achieve higher revenue and PBT in FY13 versus FY12. For Aerospace, FY13 revenue is expected to be comparable to FY12 while PBT is expected to be higher. STE views the American Airlines-US Airways merger as neutral to slightly positive; cost control after merger could lead to more outsourcing. For Electronics and Marine, FY13 revenue and PBT are expected to exceed FY12 figures. For Land Systems, FY13 revenue is expected to be higher while PBT is expected to be comparable for FY12.
Maintain HOLD
We forecast a FY13F EPS of 19.9 S cents, and keeping a P/E peg of 20.7x, we raise our fair value from S$3.90 to S$4.12 and maintain a HOLD on STE. We estimate a FY13F dividend yield of 4.5%.
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