STEng – Lim and Tan

ST ENGINEERING

S$2.68-STE.SI

• STE was, on Wed Dec 28th back to the $2.66 low first reached in mid August, itself the lowest since 2009.

• The stock had bounced strongly to $2.86 in early December after testing $2.67 on Nov 30.

• The significance of the technical support at $2.60-2.70 area lies in the fact that it was the top of the recovery range that prevailed through Apr – Sept’09.

• The uptrend line connecting the low points of Oct’08 ($1.99) and Feb’09 ($2.06) presently points to $2.40-2.50 as the next support should $2.66 give way.

• Assuming an unchanged dividend of 14.55 cents for 2011 as for 2010 (3 cents interim, 4 cents final and 7.55 cents special), yield at current price would be 5.5% and 5.8-6.1% if the stock drops to $2.40-2.50.

• Earnings for the first 9 months of 2011 are 8% ahead of the same period last year.

• This is not bad for a defensive stock like ST Engineering, whose biggest division (ST Aerospace) counts on the Singapore Defense as key customer.

• Buy.