SINGAPORE (Nov 19): ST Engineering’s latest third-quarter results have shown improvements in profitability in almost all its business units. This comes on the back of a growing order book and a proposed acquisition that would see its aerospace unit move up the value chain to produce higher-value original equipment manufacturer (OEM) parts.

For 3QFY2018 ended Sept 30, ST Engineering’s revenue grew 1% y-o-y to $1.6 billion, but earnings expanded by a greater magnitude of 5% y-o-y to $134.6 million. The revenue growth was driven mainly by contributions from the aerospace and electronics units, which partially offset the declines by the land systems and marine units.

“We think the market could reward the company for delivering steady growth amid margin expansion, on the back of strict cost controls,” writes CGS-CIMB analyst Lim Siew Khee in a Nov 15 note. At $3.50, ST Engineering is trading at 18 times earnings, which is below its 10-year average valuation of 19 times earnings, she says. Lim is keeping her “add” call and has raised the price target for the stock from $3.80 to $3.94.

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