- RE-ITERATE BUY Entry 3.88 – Target – 4.23 Stop Loss – 3.77
- ST Engineering is a global technology, defence, and engineering group with offices across Asia, Europe, the Middle East, and the US. It uses technology and innovation to solve real-world problems and improve lives through its diverse portfolio of businesses across the aerospace, smart city, defence, and public security segments.
- Bought back 2 million shares since April 2022. After securing a share buyback mandate for max 62.4 million shares on 21 April 2022, STE has recently started to acquire shares in the open market at S$3.91 to S$3.97 apiece. We believe that these open market acquisitions would help place a price floor on the stock. With about 97% of its mandate still available for use until next year, we reckon that STE will be able to time its purchases opportunistically.
- 1Q22 results saw broad based growth across all business units. STE announced 1Q22 revenue of S$2bn (+13%YoY), in line with its pre-pandemic performance. This was achieved by broad based revenue growth across Commercial Aerospace (+22% YoY), Urban Solutions & Satcom (+12% YoY), and Defence & Public Security (+9% YoY). STE also reported a robust order book, growing to S$21.3bn (+10% YoY) with 1Q22 new contracts mainly coming from Defence & Public Security (S$1.3bn), followed by Commercial Aerospace (S$0.9bn), and Urban Solutions & Satcom (S$0.2bn).
- Positive consensus estimates. The Street is mostly positive on STE’s prospects with 11 BUYS, 2 HOLDS and 1 SELL, and a 12M TP of S$4.50. The updated market consensus of the EPS growth in FY22/23 stands at 3.3%/12.2% YoY, respectively, translating to 20.9×/18.7x forward PE. FY22F/23F dividend yield is 4.0%/4.1% respectively.
(Source: Bloomberg)