SINGAPORE (Aug 15): UOB is placing its “buy” call for ST Engineering (STE) under review, pending further updates from an analyst briefing later on Monday.

Overall, UOB has lowered its 2016 PBT forecast from comparable to lower.

This comes as ST Kinetics recognised $10 million in gains from the disposal of a Chinese subsidiary. Excluding that, STE’s 2Q16 earnings would have declined by 6.5% y-o-y.

STE's core 1H16 earnings amounted to 45% of UOB’s full-year estimate. This is in line with UOB's expectations given that 2H tends to be seasonally stronger, says analyst K Ajith in a Monday report.

In the aerospace division, PBT rose 5% y-o-y on the back of a 20% rise in revenue. The acquisition of a subsidiary resulted in a 32% rise in PBT for the Engineering & Materials Services (EMS) sector while contributions from the airframe maintenance sector rose 11% as compared to a year ago despite a 9% decline in revenue.

In the Marine division, PBT fell 31% y-o-y but improved q-o-q, due to lower declines at the shipbuilding segment.

In the Electronics division, PBT rose 10% y-o-y, led by a 33% rise in PBT for the Communication & Sensor Systems Group (CSG) segment due to increased sales of satellite communication products, as well as milestone completions of higher value contracts.

In the Land Systems division, PBT would have declined 17% y-o-y if the divestment gains of $10 million and write-back in provisions of $3.8 million had been excluded.

The group has guided for lower profitability in 2H16 for the Aerospace and Land Systems divisions, while expecting stronger performances in the Marine and Electronics divisions.

An interim dividend of 5 cents has declared, unchanged from the previous year.

As at 11.48am, shares of ST engineering are down 1.2% at $3.37. UOB’s last indicated target price for the counter was $3.50.

Will ST Engineering retain its 'buy'?

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Will ST Engineering retain its 'buy'?

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