CFA Society Singapore
SINGAPORE (July 5): ST Engineering aims to grow its Smart City revenue of $1 billion to more than double by 2022.
The group also plans to grow its core and other business segments with CAGR of 2-3x global GDP growth rate over the next five years, and expects that two-thirds of its revenue growth will be from global markets by 2022.
ST Engineering’s strong order book of $13.4 billion as at end March, providing stability and visibility. Out of this, $3.2 billion is expected to be delivered in the remaining months of April to Dec.
In FY17, Aerospace contributed 51% of group pre-tax profit, followed by Electronics at 34%, Land Systems at 14%, and Marine & Others at 1%.
This week, the group announced the divestment of 25% stake in its indirect associate, Airbus Helicopters SE Asia (AHSA) to JV partner, Airbus Helicopters SAS for EUR9.125 million ($14 million) in cash.
AHSA was set up between ST Engineering and Airbus Helicopters in 1977 to provide helicopter sales, repair, overhaul, logistics and product support services.
The divestment is a result of ST Engineering’s ongoing business review to streamline capabilities and optimise resources within its aerospace sector.
To be sure, ST Engineering’s share price has corrected by about 12% from its peak of $3.70 in mid April and is now trading at 17.5 times forward P/E with a forecast dividend yield of 4.7%.
In at least the past five years, the group has been paying out full year dividends of 15 cents per share; from FY13-FY16 a portion of this was paid as a “special dividend”.
OCBC is maintaining a “buy” on ST Engineering, with a lower fair value estimate of $3.90 from $4.00.