<Results First Take!> 3QFY23 revenue slightly surpasses expectations, though satcom division continues to weigh on profits
- Group revenue increased by 13.0% y-o-y to S$2.43bn but decreased by 5.5% sequentially; 9MFY23 revenue at S$7.3bn represents 75.0% of the consensus full-year estimate, marginally exceeding expectations.
- New contracts worth S$2.2bn were secured in 3QFY23; the total order backlog saw a marginal decrease to S$27.5bn as of Sep-23, slightly down from S$27.7bn in the prior quarter.
- Management revised down the outlook for the Urban Solutions & Satcom (USS) segment, still expecting profitability at the operating level but at a reduced scale compared to FY22.
- 3QFY23 dividend of 4.0 Scts per share was declared, in line with past quarters.
Broad-based top-line growth in both Commercial Aerospace (CA) and Defence & Public Security (DPS) divisions. 9MFY23 revenue at S$7.3bn accounted for 75.7% of our yearly forecast and has surpassed our projections, especially as 4QFY23 is typically a stronger quarter. CA segment revenue saw a significant increase of 26.5% y-o-y to S$982m in 3QFY23, propelled by growth in all MRO and OEM segments. Revenue remained stable sequentially, impacted by the lack of aircraft sales which contributed S$98m in 1HFY23. DPS 3QFY23 segment revenue at S973m rose by 2.2% y-o-y, bolstered by universal segment growth, though there was a 14.3% q-o-q decrease, likely stemming from timing discrepancies.
Satcom business to remain a drag on earnings; slight dip in contract wins is not alarming. USS division reported a revenue of S$478m in 3QFY23, marking a 4.6% q-o-q and 12.5% y-o-y increase, mainly due to contribution from TransCore, despite ongoing challenges in the satcom sector. While TransCore is still expected to contribute positively to the bottom line from next year, USS division’s EBIT is now anticipated to be below FY22, contrary to management’s earlier guidance of matching FY22, due to additional restructuring expenses in the satcom business. Contract wins in the quarter normalised to S$2.2bn, a reduction from the heightened levels of S$4.7-4.9bn seen in the previous two quarters. The slight dip in the order book is not a cause for concern.
