Author: tfwee
STEng – BT
ST Engg wins US$500m US Army contract
It’ll supply laptops, test equipment and instruments
ST Engineering has won a US$500 million contract to supply rugged laptops, test equipment and instruments to the US Army.
The five-year ‘indefinite delivery indefinite quantity’ contract gives the US Army the flexibility to acquire the items, known as At Platform Automatic Test Systems (APATS) Maintenance Support Device – Version 3 (MSD-V3) system, within stated limits.
ST Engineering’s US subsidiary VT Miltope will supply 70 per cent of the programme, with a subcontractor supplying the remainder.
The MSD-V3 is based on the TSC V3-GM45 rugged convertible laptop computer, the next generation of its TSC-750 computer, the company said.
VS Miltope, which makes the rugged computers, has been supplying its products to the US military for years. Over 20,000 units were deployed with US troops in Iraq earlier this decade. The computers are also supplied to the US Air Force, but the new contract is likely to be the biggest yet.
The militarised laptop is designed and qualified to withstand the harshest tactical environment for computer systems and is being used in forward areas under extreme weather and handling conditions.
The contract is not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engineering for the current financial year.
ST Engineering has had recent successes in foreign military contracts.
Last year, it secured a breakthrough £pounds;150 million (S$339 million) deal with the British army to supply over 100 armoured vehicles for use in Afghanistan.
Its land systems arm in July won a US$11 million deal to supply asphalt paving equipment to the US Army, the first defence sale for VT LeeBoy, an ST Engineering unit which is a leading manufacturer of commercial-class asphalt pavers.
The company has also secured multiple contracts supplying ammunition to foreign military forces, most recently a £pounds;2.8 million contract to supply 40mm ammunition to the UK Ministry of Defence, which it has done since 2002.
Yesterday, the company’s aerospace arm was awarded a Defence Industry Award of Excellence by the Defence Industry Committee of New Zealand (DICNZ) for its development of a multi-role combination solution for two Boeing 757-200 aircraft for the Royal New Zealand Air Force (RNZAF).
The second of the two converted aircraft was successfully redelivered this year with enhanced capabilities to RNZAF, and both are now operational, the company said.
STEng – CNA
ST Engineering unit wins US$500m contract from US Army
ST Engineering said on Thursday that its unit, VT Miltope, has won a US$500 million contract to supply a maintenance support device system to the US army.
VT Miltope specialises in the design, development and production of rugged computers, servers and related peripherals that can operate in the most demanding environmental conditions.
The company will provide the US army with an “At Platform Automatic Test” systems maintenance support device.
The contract is not expected to have any material impact on ST Engineering’s assets and earnings for the current financial year.
– CNA/sc
TELCO – CNA
Regulatory changes best bet for StarHub, say analysts
StarHub’s stock price has come under pressure of late, following news that it had lost the rights to broadcast English Premier League football matches in Singapore.
And it took another hit this week when it became the only player not offering the popular iPhone.
With sentiment in its outlook depressed, market watchers say StarHub’s best bet for a change of fortune will be for authorities to make content sharing compulsory.
StarHub is clearly in damage control mode, trying to find its footing again after having lost the rights to broadcast EPL matches in Singapore.
Investors started selling out, with the counter now down by some 10 per cent since the news broke – from S$2.17 per share on September 30 to S$2.02 at closing on October 14.
Market-watchers say it is going to get tougher, now that M1 is also selling the iPhone, leaving StarHub as the only telco in Singapore not carrying the popular mobile handset.
At least three brokerages downgraded their calls on the counter this month. But some analysts say they started to hold a pessimistic view even earlier.
Gregory Yap, senior investment analyst at Kim Eng Research, said: “I took the view that if StarHub were to win the EPL rights, it would have meant that they would lose more money in pay-TV, which is already a loss-making enterprise for them.
“And if they were to lose the EPL rights as what has turned out, then they would start to lose their subscribers to SingTel. Either way it was no-win scenario.”
Analysts say StarHub’s best hope for a turnaround may be a change in regulations to allow content-sharing. This could allow for the resale of broadcasting rights and allow other media companies to screen EPL on their own platforms.
But it is still uncertain if changes will happen at all. It would also depend on whether the EPL allows this for Singapore.
Meanwhile, M1 has become a favourite with analysts – because it is seen as having avoided a bruising battle for the football rights.
One reason is that it had escaped what has been labelled a bruising battle for the football broadcast rights, and has been able to focus on steadily improving their market share.
The view on SingTel is also optimistic due to its strong balance sheet, which can help it tide over short-term losses more easily than its rivals.
But some say it may be a good time to move away from the defensive telco industry and capitalise on high-beta stocks instead.
Roger Tan, vice president of SIAS Research, said: “In a good time, you would see higher beta stocks rising faster than the underlying STI. At this point of time, with the economy recovering, and investors coming back into the market to pick on good stocks, investors may be able to enhance their returns more with taking higher beta stocks, rather than being defensive with the telco side.”
Analysts are expecting results for the telco sector to show growth for the third quarter, and some are waiting till then to review their stock calls. – CNA/de
M1 – CIMB
Growth momentum to continue
3Q09 results preview
Maintain Neutral, target price of S$2.00 and earnings forecasts. We maintain our earnings forecasts and DCF-based target price of S$2.00 (WACC: 9.5%, LT growth: 1%) for M1. M1 remains our top pick in the sector despite our NEUTRAL rating. While we see a lack of price catalysts, downside should be limited by its attractive yields of 8% and best exposure to wireless broadband and NGNBN. We remain UNDERWEIGHT on the sector as we prefer higher-beta sectors given our positive view of the market.
Growth trajectory to continue. M1 is slated to release 3Q09 results on 16 Oct. The growth shown in 2Q should continue in 3Q. We expect core net profit growth of 2-8% qoq to hit the S$38m-40m mark, up 10-18% yoy, although we note that 3Q08 was marred by MNP-related costs. Sales growth should be 3-5% qoq or 0-2% yoy while EBITDA margins should be flat qoq. We believe that 3Q09 sales would continue to improve as usage should perk up as the economy comes out of a recession and as IDD and roaming revenue begins to flow in again. The development of its wireless broadband business (mobile data was about 10.9% of 2Q09 service revenue) should provide another fillip to growth. Finally, M1 has been emphasising new customer segments such as youths and foreign professionals.
Cost controls in place. M1’s unyielding focus on cost containment has helped to sustain and even lift its margins, although masked by Take 3. 2Q09 EBITDA margins touched 41% from 38.6% in 1Q08. We believe that active cost controls would continue, especially in the areas of staff costs (9.4% of revenue), leased circuit costs as it builds its own backhaul (6.8%) and other cost of sales (10.4%).
iPhone deal. M1 announced that it has reached an agreement with Apple to import iPhones into Singapore, which would break SingTel’s exclusivity on this handset. Details on pricing, tariffs and availability will be released over the next 3-5 weeks.
Slightly positive. We are slightly positive over the deal as the appeal of the phone should help shield M1 from churns and allow it to protect and even raise its market share. Moreover, we see the iPhone as an ARPU stimulator through higher data usage. SingTel has revealed in the past that ARPUs from iPhone users are 1.5x higher than from normal postpaid users.
On the flipside, we believe that M1 will be fairly aggressive on pricing and will have to absorb the resultant margin impact as it expenses costs upfront. It has yet to decide whether to include the iPhone as part of Take 3. Even if included, most handsets should still remain sold on non-Take 3 plans. On top of that, we believe that SingTel has locked up the bulk of the pent-up demand for this phone and M1 would be left with more marginal users or slower adopters.
M1 – BT
Monopoly ends as M1 hooks up with iPhone
SingTel’s exclusive reign over, iPhone prices may fall
MobileOne has finally been given a bite at the iPhone, a move which breaks Singapore Telecommunications’s year-long stranglehold on the coveted touch-screen handset.
The iPhone will go on sale at M1 stores within the next two months after Singapore’s smallest operator announced yesterday that it has sealed an agreement with Apple to bring in the device.
New M1 price plans will also be introduced to accompany the iPhone but these will only be announced closer to the launch date, the firm said a briefly-worded statement.
As reported by BT on Monday, Apple has been in talks with both M1 and StarHub in the last few months as part of its global strategy to ramp up iPhone sales but a deal could not be reached earlier despite repeated appeals from their customers.
The need to commit to a high sales volume and revenue-sharing were among the factors which led to the initial impasse. This left SingTel with a default monopoly on the iPhone even though exclusivity is not a condition in its contract.
With the conclusion of the M1-Apple deal, StarHub stands as the only local telco without access the touch-screen gizmo. However, company spokesman Michael Sim said that StarHub is ‘still interested to bring the iPhone’ to its customers.
SingTel was given first dibs at selling the iPhone 3G in Singapore in August last year and this arrangement was extended to the latest model – the iPhone 3GS – this July.
Consumers currently pay nothing to $678 for an iPhone at SingTel, depending on the choice of subscription plan. With the loss of its exclusive reseller rights, market watchers say that iPhone prices could fall to reflect the new market duopoly.
‘With SingTel losing its reseller rights to the exclusive iPhone, pricing is likely to come down, implying higher subsidies,’ said DBS Vickers analyst Sachin Mittal.
‘The iPhone has always been a multi-operator offering in Australia, its strongest market in APEJ (Asia-Pacific excluding Japan),’ added Aloysius Choong, a research manager with technology analyst firm IDC Asia-Pacific.
While a smaller price tag is undoubtedly good news for consumers, resellers such as SingTel and M1 will have to wait longer to recoup their iPhone subsidies.
‘Instead of an estimated six to nine months break-even time for the iPhone deal with customers, it may take up to one-year for operators to reach the break-even point if prices come down,’ Mr Mittal said.