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ST Engineering buys back shares again after 1Q update; Keppel sells Dyna-Mac stake to Hanwha

The Edge Singapore
The Edge Singapore  • 3 min read
ST Engineering buys back shares again after 1Q update; Keppel sells Dyna-Mac stake to Hanwha
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Singapore Technologies Engineering bought back shares once again after its 1QFY2024 ended March business update on May 13 which reported an 18% y-o-y revenue jump.

On the same day after the update, ST Engineering bought back 500,000 shares on the open market at between $3.98 and $4.03 each. This brings the total number of shares bought back under the current mandate to 6.38 million. The strong showing helped lift ST Engineering’s share price to as high as $4.30 on May 15, its highest level in 50 months.

The better showing by ST Engineering was due to a strong pick-up in its two largest business segments of commercial aerospace and defence and public security, which were up 32% y-o-y and 14% respectively. This has inspired several analysts to upgrade their calls as they expect the earnings growth to continue, underpinned by an order book of some $27.7 billion. The company is maintaining its quarterly dividend payout of 4 cents.

Luis Hilado of Citi Research believes that ST Engineering’s revenue growth still has momentum and will lead to consensus upgrades. Hilado joins many other analysts who have already rated the stock a “buy” despite his previous call being “neutral”.

Hilado has raised his FY2024 and FY2025 earnings forecasts by 5% and 6% respectively. Based on the same 20 times valuation multiple, which is the 10-year forward mean, Hilado has derived a new target price of $4.62 from $3.76.

Krishna Guha of Maybank Securities observes that ST Engineering’s continued order wins and deliveries have resulted in a strong order book. New growth areas such as digital business are on track to surpass its $500 million target by FY2026.

See also: Raffles Medical Group CEO Loo continues to increase stake in the company

“Overall, there was a steady pace of execution, which should result in a forecasted 15% CAGR in earnings per share and 5% dividend yield,” says Guha, who has raised the brokerage’s target price on this stock to $4.30 from $4.20 while keeping his “buy” call.

Hanwha buys Keppel’s Dyna-Mac stake
In another significant insider transaction this past week, Keppel sold off its entire chunk of 250 million shares or 23.91% stake in Dyna-Mac Holdings NO4 -

for 40 cents each, or $100 million in total, to two entities under Korea’s Hanwha Group, known for its shipbuilding business.

See also: Jardine Matheson increases stake in Jardine C&C; buys 444,900 shares at $27 apiece

Keppel first invested in Dyna-Mac back in 2011 at 35 cents each. Since then, Keppel has exited the offshore and marine business to focus on being a global asset manager while divesting offshore and marine legacy assets which are deemed non-core.

Two Hanwha entities were used to buy over the Dyna-Mac shares from Keppel. Hanwha Ocean acquired 225 million shares for $90 million while Hanwha Aerospace acquired the remaining 25 million shares for $10 million.

According to a May 13 regulatory filing, before buying Keppel’s stake, Hanwha Ocean held about 16.43 million Dyna-Mac shares or a 1.57% stake while Hanwha Aerospace also held a similar level of shares. As Hanwha Aerospace owns a 23.14% stake in Hanwha Ocean, the Dyna-Mac shares held by Hanwha Ocean are of deemed interest to Hanwha Aerospace, giving it a total interest of 282.86 million shares, or 27.05%.

Dyna-Mac’s single largest shareholding bloc of 334.2 million shares, or 31.96%, remains in the hands of the estate of the late founder and CEO Desmond Lim Tze Jong.

In his May 13 note, Maybank Securities’ Jarick Seet has maintained his “buy” call and 46 cents target price on Dyna-Mac. Seet believes that Hanwha and Dyna-Mac could form a synergistic partnership where both parties could benefit from the booming FPSO (floating production storage and offloading) space. “Hanwha Ocean’s investment also represents firm confirmation by one of the industry’s largest players of Dyna-Mac’s value and potential,” he adds. Dyna-Mac’s order book now stands at around $896 million, with deliveries stretching to 2026.

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