STEng – MayBank Kim Eng
Largest Marine Win Since Apr 2012
New Marine contracts worth SGD446m. ST Engineering (STE) announced new orders worth SGD446m secured by its marine division. Awarded in 4Q13, these contracts are for logistics management, maintenance, major upgrade and conversion projects, which would be carried out at its Singapore shipyards. These contracts are in addition to the USD350m (c.SGD420m) shipbuilding contract awarded to its US shipyard, VT Halter Marine in Nov 2013. In our view, this is a significant contract win for the marine division as its value is close to its annual sales in Asia (2012: SGD492m). Furthermore, it is the largest marine contract announced since April 2012, when the SGD880m shipbuilding order for the Royal Oman Navy was awarded.
Brings total order win to SGD3.0b in 2013; await better entry point. While providing better visibility for its marine division, the latest contracts are not material to the group’s overall earnings. With the latest win, an estimated SG3.0b worth of contracts was awarded to the STE group in 2013. The stock remains unattractive at 20x FY14E P/E (marginally above its historical average of 19x). Maintain Hold.