ST Engineering

CIMB Research, Aug 28

WE see a buying opportunity from the recent pullback of ST Engineering's (STE) share price. Business fundamentals remain strong, but we see STE benefiting from the strengthening of the US dollar with positive translation of earnings. Dividend yield has also become more attractive at 4.8 per cent.

Maintain "outperform" and target price of S$4.70, still based on blended valuations (PE, discounted cash flow, dividend yield). Given expected earnings growth of 10 per cent for FY2013, we view the current valuation of 17.5 times as unjustified, as it is below its pre-GFC range of 20-22 times (with steady earnings growth of 11 per cent). Key catalysts include sustained US dollar strength and stronger margins from aerospace.

OUTPERFORM