BUY
Last Traded Price (13 Aug 2021): S$4.09 (STI : 3,165.49)
Price Target 12-mth: S$4.36 (7% upside) (Prev S$4.20)

Orderbook reaches new highs

Investment Thesis
Strong order backlog and business diversity underpins earnings visibility. The order backlog for STE remains at record levels of S$16.8bn as at end-1H21, despite revenue growth of 2% in 1H21, underpinned by strong new order wins in 1H21. While STE’s commercial aerospace business will take longer to recover, we expect strong growth momentum in its smart-city, satcom, cybersecurity, and defence businesses to drive earnings recovery over the next few years.


Government grants will aid earnings resilience. ST Engineering estimates receipt of c.S$200m in government grants in FY21, S$100m more than earlier estimated, owing to additional grants outside Singapore. Thus, STE’s earnings
trajectory will likely not stray too far off FY19 levels despite the impact of the pandemic.


High certainty of c.4% dividend yield provides support. The balance sheet remains healthy and operating cash flows remained strong in 1H21. An interim dividend of 5.0Scts per share was declared, on track to 15Scts annual dividend for FY21.