FY10 above our expectations; Strongest quarter since recession

•Revenue increased by 7.9% to S$5.98bn, PATMI increased 10.6% to S$491mn

•Above our expectations as STE reports the strongest quarterly post-recession results

•Top line growth across all business segments except Aerospace

•Strong order book of S$11.5bn; Positive guidance for 2011

•Maintain Buy recommendation with revised target price of S$3.80

FY10 results discussion. The result for STE was above our expectations. Revenue growth of 7.9% would have been c.S$30mn higher if adjusted to account for unfavorable forex (weakening of the € and US$). There is a significant change to the depreciation policy for the Group that contributed to a 9.8% increase in Gross Profit. Consequently, PATMI surged 10.6% to S$491mn. Dividends of 11.55cents (Final: 4.00+ Special: 7.55) will be proposed by the management.

Management Guidance. STE typically provides guidance for up to 12months in advance. The company expects to deliver S$3.7bn of their S$11.5bn order book in FY11 and guidance provided demonstrated management optimism for FY11. For the Aerospace sector, revenue is expected to be comparable to that of FY10, while PBT is expected to be higher. This guidance is fairly conservative in our view as we expect stronger growth in the Aerospace business, following strong capacity growth in the aviation industry. Part of the reason for this conservative guidance is due to a significant depreciation of the US$ over the past year. As majority of the aviation contracts are denominated in US$, a further weakening of the US$ would result in translational forex loss when converted into S$. For the rest of the business segments, management expects higher revenue and PBT as compared to FY10.

Risks. Further weakening of US$ & € against S$; Slow down in capacity added by commercial customers; Rise in interest rates could reduce attractiveness of STE’s dividend yield; Greater risk appetite by investors could reduce demand for low beta stocks.

FY10 above our expectations; Strongest quarter since recession

•Revenue increased by 7.9% to S$5.98bn, PATMI increased 10.6% to S$491mn

•Above our expectations as STE reports the strongest quarterly post-recession results

•Top line growth across all business segments except Aerospace

•Strong order book of S$11.5bn; Positive guidance for 2011

•Maintain Buy recommendation with revised target price of S$3.80

FY10 results discussion. The result for STE was above our expectations. Revenue growth of 7.9% would have been c.S$30mn higher if adjusted to account for unfavorable forex (weakening of the € and US$). There is a significant change to the depreciation policy for the Group that contributed to a 9.8% increase in Gross Profit. Consequently, PATMI surged 10.6% to S$491mn. Dividends of 11.55cents (Final: 4.00+ Special: 7.55) will be proposed by the management.

Management Guidance. STE typically provides guidance for up to 12months in advance. The company expects to deliver S$3.7bn of their S$11.5bn order book in FY11 and guidance provided demonstrated management optimism for FY11. For the Aerospace sector, revenue is expected to be comparable to that of FY10, while PBT is expected to be higher. This guidance is fairly conservative in our view as we expect stronger growth in the Aerospace business, following strong capacity growth in the aviation industry. Part of the reason for this conservative guidance is due to a significant depreciation of the US$ over the past year. As majority of the aviation contracts are denominated in US$, a further weakening of the US$ would result in translational forex loss when converted into S$. For the rest of the business segments, management expects higher revenue and PBT as compared to FY10.

Risks. Further weakening of US$ & € against S$; Slow down in capacity added by commercial customers; Rise in interest rates could reduce attractiveness of STE’s dividend yield; Greater risk appetite by investors could reduce demand for low beta stocks.

ST Engg full-year net profit climbs 11%

Strong performance from all 4 business sectors; dividend of 11.55cts proposed

SINGAPORE Technologies Engineering (ST Engg) saw full-year net profit jump 11 per cent to $491 million from $443.9 million a year before, thanks to strong profit growth from all four business sectors – aerospace, electronics, land systems and marine.

Strong turnover growth from its land systems and marine sectors also lifted group revenue to $5.99 billion for the year ended Dec 31, 2010, 8 per cent up from $5.55 billion the year before.

Earnings per share thus grew 10 per cent to 16.21 cents, while net asset value rose from 52.09 cents at the end of FY09 to 53.38 cents as at end FY10. The group’s economic value added rose 21 per cent to $369.7 million.

ST Engineering’s board yesterday proposed a final dividend of 11.55 cents a share – made up of an ordinary dividend of 4 cents and a special dividend of 7.55 cents.

This means, adding the interim dividend of 3 cents a share paid in September 2010, a full year dividend of 14.55 cents – a yield of 4.36 per cent based on the average closing share price of the last trading day of 2010 and 2009.

For the full year, commercial sales came up to $3.5 billion, or about 59 per cent of turnover for the group, which also supplies equipment to the Republic of Singapore Armed Forces and other military customers.

The group’s cash and cash equivalents and short- term investments totalled $1.79 billion, including advance payments from customers of $1.53 billion.

ST Engineering said yesterday that higher project deliveries and the sale of specialty vehicles under ST Kinetics led to a 29 per cent increase in land systems’ turnover. ST Marine, the other business arm to record significant turnover growth of 10 per cent, crossed the billion dollar mark for the first time on the back of increased shipbuilding, ship repair and engineering activities. Revenue growth fuelled double-digit rise in profit before tax for both sectors.

Though revenue from the aerospace sector was flat year-on-year, profit grew as depreciation and finance costs fell. The electronics sector, too, was significantly more profitable despite marginal revenue growth, thanks to a favourable sales mix.

President and CEO Tan Pheng Hock yesterday said that ST Engineering invested more than $300 million in new capabilities and capacity across the four sectors in 2010.

He added that its strong order book of $11.5 billion ‘provides good visibility of the group’s future revenue stream’. About $3.7 billion of these orders are expected to be delivered within this year.

Mr Tan expects the group to achieve higher turnover and profit before tax this financial year than in the last. Revenue growth is expected in all but the aerospace sector, but all four sectors are expected to notch up higher profit before tax in FY11, compared to FY10.

ST Engineering closed a cent lower at $3.15 before its results were announced yesterday.

ST Engg full-year net profit climbs 11%

Strong performance from all 4 business sectors; dividend of 11.55cts proposed

SINGAPORE Technologies Engineering (ST Engg) saw full-year net profit jump 11 per cent to $491 million from $443.9 million a year before, thanks to strong profit growth from all four business sectors – aerospace, electronics, land systems and marine.

Strong turnover growth from its land systems and marine sectors also lifted group revenue to $5.99 billion for the year ended Dec 31, 2010, 8 per cent up from $5.55 billion the year before.

Earnings per share thus grew 10 per cent to 16.21 cents, while net asset value rose from 52.09 cents at the end of FY09 to 53.38 cents as at end FY10. The group’s economic value added rose 21 per cent to $369.7 million.

ST Engineering’s board yesterday proposed a final dividend of 11.55 cents a share – made up of an ordinary dividend of 4 cents and a special dividend of 7.55 cents.

This means, adding the interim dividend of 3 cents a share paid in September 2010, a full year dividend of 14.55 cents – a yield of 4.36 per cent based on the average closing share price of the last trading day of 2010 and 2009.

For the full year, commercial sales came up to $3.5 billion, or about 59 per cent of turnover for the group, which also supplies equipment to the Republic of Singapore Armed Forces and other military customers.

The group’s cash and cash equivalents and short- term investments totalled $1.79 billion, including advance payments from customers of $1.53 billion.

ST Engineering said yesterday that higher project deliveries and the sale of specialty vehicles under ST Kinetics led to a 29 per cent increase in land systems’ turnover. ST Marine, the other business arm to record significant turnover growth of 10 per cent, crossed the billion dollar mark for the first time on the back of increased shipbuilding, ship repair and engineering activities. Revenue growth fuelled double-digit rise in profit before tax for both sectors.

Though revenue from the aerospace sector was flat year-on-year, profit grew as depreciation and finance costs fell. The electronics sector, too, was significantly more profitable despite marginal revenue growth, thanks to a favourable sales mix.

President and CEO Tan Pheng Hock yesterday said that ST Engineering invested more than $300 million in new capabilities and capacity across the four sectors in 2010.

He added that its strong order book of $11.5 billion ‘provides good visibility of the group’s future revenue stream’. About $3.7 billion of these orders are expected to be delivered within this year.

Mr Tan expects the group to achieve higher turnover and profit before tax this financial year than in the last. Revenue growth is expected in all but the aerospace sector, but all four sectors are expected to notch up higher profit before tax in FY11, compared to FY10.

ST Engineering closed a cent lower at $3.15 before its results were announced yesterday.

ST Engg unit secures $160m SAF contracts

ST Engineering’s land systems arm ST Kinetics yesterday said that it has secured $160 million worth of contracts from the Singapore Armed Forces (SAF).

The two four-year contracts are for the maintenance of SAF’s vehicles and the preservation of SAF’s fleet of equipment. Both commence immediately and the preservation contract comes with an option for a two-year extension.

ST Engineering said that the contracts are not expected to have any material impact on its FY2010 financials.

ST Kinetics’ Q3 results, announced along with the rest of the ST Engineering group on Tuesday, showed a slight increase in net profit to $22.7 million.

Turnover grew 28 per cent to $373 million from $291 million in Q3 2009, mainly due to higher project deliveries from its automotive division as well as more than doubled sales from its services, trading & others division.

Automotive turnover rose 37 per cent to $270 million for the quarter and is still ST Kinetics’ main business. But an unfavourable product mix from the segment resulted in lower profits in Q3.

Its munitions & weapon business group saw revenue fall 11 per cent to $70 million and these lower sales, coupled with foreign exchange losses, drove profits down too.