SINGAPORE (June 13): OCBC Investment Research is maintaining ST Engineering (STE) at “buy” given the group’s positive long-term prospects.

STE recently announced its aerospace arm and Vietnam Airlines Engineering Company (VAECO), have incorporated a new JV, Vietnam Singapore Technologies Engineering Aerospace Co.

See: ST Engineering expands MRO presence to Vietnam with $5.3 mil JVCo

The JV company will provide component Maintenance, Repair & Overhaul (MRO) solutions, and STE has a 49% stake in the JV. The new component MRO facilities are expected to begin operations in mid 2019.

Separately, STE has also entered into a partnership agreement with Nokia on key areas such as 5G and Internet of Things (IoT).

See: ST Engineering and Nokia to collaborate on 5G and IoT

“The collaboration will allow both companies to cross sell their solutions and expand business offerings,” says analyst Low Pei Han in a Thursday report.

STE will resell Nokia’s internet protocol (IP), optical networking and wireless broadband solutions which include 5G, last-mile and analytics. In turn, Nokia will incorporate STE’s Very Small Aperture Terminal (VSAT) and cybersecurity solutions in its global project offerings.

Year to date, STE’s stock is up 17.2% compared to the STI’s 4.5% rise

As at end March, STE has increased its order book to a high of $14.1 billion, out of which $4.2 billion will be delivered in 9M19.

Looking ahead, potential catalysts include the US Postal Service’s contract for next-gen electric trucks, as well as the exercising of options for two polar security cutters by the US Coast Guard.

See: Trump's tweet on US penny stock Workhorse throws spotlight on little-known ST Engineering unit

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In the longer term, OCBC expects further growth in order book with better traction in Smart City solutions and export of defence solutions.

“Meanwhile, we are fine-tuning our estimates and fair value rises from $4.22 to $4.38,” says Low.

As at 3.10pm, shares in STE are down 1 cent at $4.09 or 20.3 times FY20F earnings.