NEAR MISS WITH POSITIVE OUTLOOK

•FY11 revenue flat; PATMI up 7%

•Robust order book of S$12.3b

•12.5 cent dividend payout

Lower revenue but higher PATMI

ST Engineering (STE) 4Q11 revenue fell 5% YoY to S$1.5b but PATMI edged 2% higher to S$152m. The 4Q11 PATMI gain was primarily driven by two factors – 1) a total of S$10m of one-off losses in 4Q10 and 2) a lower tax rate of 16% in 4Q11, compared to the 23% tax rate in 4Q10. For the full year, STE’s FY11 revenue remained flat at a tad shy of S$6b while PATMI grew 7% to S$528m, missing consensus revenue and PATMI estimates by 8% and 4% respectively. On a more positive note, STE disclosed a robust order book of S$12.3b at end-FY11 and announced a total dividend payout of 12.5 cents/share, which represents a 90% dividend payout ratio for FY11. The dividend payout is made up of a final dividend of 4 cents/share and a special dividend of 8.5 cents/share.

Segmental contribution

In terms of revenue contribution from the different segments in 4Q11, Aerospace grew a strong 14% YoY to S$503m, Electronics gained 8% to S$408m, Land Systems remained flat at $465m, while Marine plunged 68% to S$91m. Management clarified that STE’s Marine segment was hit by a one-time S$176m reversal of revenue, which was the result of the termination of a shipbuilding contract for a Ropax ferry with Louis Dreyfus Armateurs announced during 4Q11. Land Systems was the star segment in pre-tax profit growth recording a 27% YoY jump to S$37m, while Marine edged 1% higher to S$38m. However, Aerospace pre-tax profit fell sharply by 19% to S$71m and Electronics eased 2% to S$33m.

Maintain BUY with higher S$3.32 fair value

At last night’s results briefing, management guided for both revenue and pre-tax profit growth in FY12, barring unforeseen circumstances. Compared to our previous fair value estimate of S$3.01/share, based on an 18.5x P/E multiple, we now peg our estimate of STE’s FY12 EPS to its historical average forward P/E multiple of 19x to arrive at a fair value of S$3.32/share. Maintain BUY.

ST Engg posts $528m full-year net profit

Group has record orderbook of $12.3b, expects higher sales in 2012

ST Engineering – which rang in a record orderbook of $12.3 billion – said yesterday that it expected higher revenue and pre-tax profit this year, with about one- third of the order backlog, or $3.9 billion, set for delivery in 2012.

The details came as full- year net profit for the group edged higher by 7.4 per cent amid flat growth in sales.

Net profit for the 12 months ended Dec 31, 2011, stood at $528 million, up from 2010’s $491 million.

The results were below earnings estimates of $579 million, according to a Bloomberg poll of 15 analysts.

The full-year profit attributable to shareholders translated to earnings per share of 17.28 cents, up from 2010’s 16.21 cents.

Full-year revenue stood pat at $5.99 billion. Sales in the aerospace and electronics segments were stronger but the group saw poorer performance in the land systems and marine divisions.

But cost of sales went down by a slightly quicker rate, lifting gross profit by 3.3 per cent to $1.3 billion for the year.

A ‘benchmarking exercise’ of inventory obsolescence estimates brought its net allowance for inventory obsolescence to $181,000 compared with $27.6 million a year ago.

Net finance costs fell 55.3 per cent to $19.4 million, thanks to foreign exchange gains of $4.83 million. A year ago, the group posted a forex loss of $8.72 million. Interest expenses were also lower.

Revenue from its biggest sales contributor – the aerospace division – inched up 3 per cent to $1.92 billion, with higher revenue from its component/engine repairs and overhaul business as well as engineering and material services offset by lower sales in its aircraft maintenance and modification business. Its revenue contribution stood at 32 per cent of total sales.

Sales from its electronics department rose 7 per cent to $1.48 billion, boosted in part by recorded revenue from its work on the Circle Line and the Bangkok automatic fare collection system projects.

But revenue from its marine sector slid 16 per cent to $876 million, dragged down by lower shipbuilding revenue after a contract for a roll-on/roll-off passenger ferry – ships that have cargo with wheels driven on and off the ship – was terminated.

In profitability terms, only the land systems division recorded lower pre-tax profit for the full year, compared with the previous 12 months.

Pre-tax profit for the sector stood at $108 million, down 5 per cent from a year ago, due mainly to the impact of an ‘unfavourable product mix’ that was partly offset by lower foreign exchange losses and favourable fair value change of embedded derivatives.

Earnings before tax for the aerospace sector rose 6 per cent to $278 million, while pre-tax profit for the electronics sector rose 7 per cent to $137 million.

The group proposed a final dividend of 12.5 cents per share.

Shares of ST Engineering closed two cents higher at $3.08 yesterday.

ST Engg posts $528m full-year net profit

Group has record orderbook of $12.3b, expects higher sales in 2012

ST Engineering – which rang in a record orderbook of $12.3 billion – said yesterday that it expected higher revenue and pre-tax profit this year, with about one- third of the order backlog, or $3.9 billion, set for delivery in 2012.

The details came as full- year net profit for the group edged higher by 7.4 per cent amid flat growth in sales.

Net profit for the 12 months ended Dec 31, 2011, stood at $528 million, up from 2010’s $491 million.

The results were below earnings estimates of $579 million, according to a Bloomberg poll of 15 analysts.

The full-year profit attributable to shareholders translated to earnings per share of 17.28 cents, up from 2010’s 16.21 cents.

Full-year revenue stood pat at $5.99 billion. Sales in the aerospace and electronics segments were stronger but the group saw poorer performance in the land systems and marine divisions.

But cost of sales went down by a slightly quicker rate, lifting gross profit by 3.3 per cent to $1.3 billion for the year.

A ‘benchmarking exercise’ of inventory obsolescence estimates brought its net allowance for inventory obsolescence to $181,000 compared with $27.6 million a year ago.

Net finance costs fell 55.3 per cent to $19.4 million, thanks to foreign exchange gains of $4.83 million. A year ago, the group posted a forex loss of $8.72 million. Interest expenses were also lower.

Revenue from its biggest sales contributor – the aerospace division – inched up 3 per cent to $1.92 billion, with higher revenue from its component/engine repairs and overhaul business as well as engineering and material services offset by lower sales in its aircraft maintenance and modification business. Its revenue contribution stood at 32 per cent of total sales.

Sales from its electronics department rose 7 per cent to $1.48 billion, boosted in part by recorded revenue from its work on the Circle Line and the Bangkok automatic fare collection system projects.

But revenue from its marine sector slid 16 per cent to $876 million, dragged down by lower shipbuilding revenue after a contract for a roll-on/roll-off passenger ferry – ships that have cargo with wheels driven on and off the ship – was terminated.

In profitability terms, only the land systems division recorded lower pre-tax profit for the full year, compared with the previous 12 months.

Pre-tax profit for the sector stood at $108 million, down 5 per cent from a year ago, due mainly to the impact of an ‘unfavourable product mix’ that was partly offset by lower foreign exchange losses and favourable fair value change of embedded derivatives.

Earnings before tax for the aerospace sector rose 6 per cent to $278 million, while pre-tax profit for the electronics sector rose 7 per cent to $137 million.

The group proposed a final dividend of 12.5 cents per share.

Shares of ST Engineering closed two cents higher at $3.08 yesterday.