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ST Engineering, Haw Par, Hotel Properties win top spots for second year running

Stanislaus Jude Chan
Stanislaus Jude Chan • 6 min read
ST Engineering, Haw Par, Hotel Properties win top spots for second year running
SINGAPORE (Sept 16): Even as international markets and companies are falling prey to rising volatility, Singapore Technologies Engineering is powering through the macroeconomic uncertainties — not unlike one of its new Hunter Armoured Fighting Vehicles.
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SINGAPORE (Sept 16): Even as international markets and companies are falling prey to rising volatility, Singapore Technologies Engineering is powering through the macroeconomic uncertainties — not unlike one of its new Hunter Armoured Fighting Vehicles.

Backed by a strong track record, the company, 51.97%-owned by Temasek Holdings, is able to win a steady stream of new defence projects and maintenance contracts. It is also moving big into new growth areas such as the internet of things (IOT), winning not just new businesses but also delivering returns for shareholders.

Against this backdrop, ST Engineering scored the highest weighted return on equity of 22.47% in the multi-industry sector. In addition, the company scored highly in the ESG category: It chalked up 22.88 points, just a whisker below sector winner Sembcorp Industries’ 23.22 points. With a strong showing on these two scores, ST Engineering has once again been named the overall winner in the multi-industry sector for The Edge Singapore Billion Dollar Club.

The company, in its more than 40-year history, has grown to become a multi-faceted engineering group. It has a headcount of about 22,000 and customers from more than 100 countries.

While a significant chunk of its business comes from the Singapore military, it has built a very diverse customer base around the world. For example, it is involved in about 500 smart city projects across 70 cities.

On Aug 14, ST Engineering announced that, for the latest quarter ended June 30, it posted earnings of $138.2 million, up 18% y-o-y, on the back of an 8% y-o-y increase in revenue to $1.78 billion. On the same day, it also announced that its order book stood at a record-high level of $15.6 billion. Of that amount, some $3.8 billion is to be fulfilled by year-end.

The record order book comes on the back of contract wins across all four of its sectors. “[We] have good visibility in terms of our contract wins. We are well-positioned for future growth,” says Vincent Chong, the company’s president and CEO.

For example, ST Engineering recently clinched a $1 billion contract for the first Polar Security Cutter for the US Navy. It also inked a partnership agreement with telecommunications equipment manufacturer Nokia to collaborate on key technology areas such as 5G and IOT, and announced a joint venture between its aerospace unit and the engineering arm of Vietnam Airlines to provide component maintenance, repair and overhaul (MRO) solutions in Vietnam.

And the positive news flow has not gone unnoticed by investors. Shares in ST Engineering have climbed 25% since the start of 2019 to hit a multi-year peak of $4.35 at end-July.

Haw Par roars to strong returns

The best performer by share price return in the multi-industry sector this year is Haw Par Corp, which has recorded an annual return of 16.7% over the past three years.

The company is best known for its Tiger Balm topical analgesic product, which has evolved from a traditional remedy into a global wellness brand with a presence in more than 100 countries. Besides the consumer healthcare business, the group also engages in the leisure business and holds significant investments in securities and properties.

For FY2018, Haw Par reported a 46.2% y-o-y increase in full-year earnings to $179.1 million, led by an increase in dividend income from the group’s strategic investments and higher interest income. FY2018 group revenue rose 6.8% to $237.8 million on the back of better performance at the group’s healthcare division, driven by higher sales volume in key markets.

Haw Par’s stellar share price performance was further helped by a special dividend of 85 cents a share declared for FY2018, in celebration of the 50th anniversary of its incorporation and listing on the Singapore Exchange in 1969. This brought total dividends for FY2018 to $1.15 cents a share.

Hotel Properties has bumper year

Meanwhile, property developer and hotelier Hotel Properties emerged as another big winner in the multi-industry sector. The group, which owns and manages the Concorde, Four Seasons and Hilton hotels in Singapore, posted earnings growth at a compound annual growth rate of 14.1% over the last three years.

The strong performance comes despite a 32% drop in earnings to $121.3 million for FY2018, compared with earnings of $178.2 million a year ago.

FY2018 revenue fell 12% y-o-y to $579.5 million, owing mainly to lower contributions from the property division, as the remaining condominium units at Tomlinson Heights had been fully sold. The lower revenue was partially mitigated by better performance by the group’s hotels in Singapore, as well as contributions from new subsidiaries Hard Rock Hotel Penang in Malaysia and The Boathouse, Phuket in Thailand.

The earnings decline was also attributable to a lower share of income from associates and jointly controlled entities, which fell to $92.8 million in FY2018, from $133.4 million a year ago. This was mainly due to lower profits from the Burlington Gate development in London.

*For the full list, go to bdc.theedgesingapore.com

CENTURION CLUB: CONSTRUCTION

Keong Hong builds on high ROE to beat competitors

Homegrown property construction, development and investment group Keong Hong Holdings has emerged winner in the construction sector under the Centurion Club Awards, pipping competitors KSH Holdings and Lian Beng Group to the title.

Keong Hong’s win was spearheaded by a weighted return on equity of 22.41% over the past three years — the highest in the construction sector. This was significantly higher than KSH’s and Lian Beng’s respective ROEs of 16.57% and 12.12%.

The group posted earnings of $22.1 million for FY2018 ended September 2018, some 64.8% lower than earnings of $62.7 million a year ago. The decline was largely attributable to a steep drop in other income to $8.6 million in FY2018, down from $57.6 million a year ago. This was due mainly to the absence of an exceptional gain of $49.8 million in 2017 on the remeasurement of an investment to fair value.

FY2018 revenue fell 29.4% to $165.2 million, owing mainly to lower recognition of revenue from construction projects. This was because some of the group’s major projects, such as the Parc Life condominium and Raffles Hospital Extension, had been largely completed in the previous year.

As at end-2018, the group’s construction order book stood at $332 million. Looking ahead, the group says it is looking for investment opportunities overseas, particularly in Vietnam, Japan, Australia, the UK and Indonesia. It adds that property development opportunities in Vietnam and Jakarta afford higher returns than in Singapore, while hotel and property investments in Japan, Australia and the UK are attractive, given their popularity as tourist destinations and stable yield.

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