Category: STEng
STEng – CIMB
Aerospace slack taken up by others
• Maintain Underperform; results within expectations. 4Q09 net profit of S$129.7m (+52% yoy) was within our expectations (S$132.3m) and consensus (S$124.4m). The star segments were Land Systems and Marine, offsetting Aerospace weakness. Although a better 2H09 kept full-year PATMI on a fairly even keel (-6% yoy), the recovery outlook is not certain. Management guides for comparable PBT for 2010. We cut our FY10-11 EPS by 5% on lower Aerospace assumptions and introduce FY12 earnings. As a result, our blended target price dips from S$3.09 to S$2.98. Another negative was the reduced dividend payout of 90%, from 100%. Full-year DPS of 13.3cts was below our expectation of 15cts and consensus (14.5cts).
• Poor Aerospace performance, but positive guidance. 4Q09 Aerospace PBT (S$57.4m) floundered after a promising 3Q (S$70.2m). Management cited fewer passenger-to-freight (PTF) jobs in 2009, sporadic work cancellations and a lack of replacement MRO jobs in 4Q. Indicative MRO demand in early 2010 was positive, though, and ongoing PTF contracts are expected to sustain profitability.
• Earnings growth for other divisions. Land Systems and Marine performed above our expectations in 4Q. Both, as well as Electronics, should book higher profitability in FY10. Land Systems should be supported by the delivery of large-sized contracts to Terrex and Warthog; both started in 2009. Marine should benefit from an Egyptian Navy contract realised in 2010, plus a variety of vessels due for delivery in the US. Higher-margin contracts (LTA Circle Line, military communication systems) should also contribute to Electronics.
• Lower payout and above-mean valuations do not make us excited about the stock. Order book was flat at S$10.3bn. 2009 PBT (S$547m) was propped up by the Jobs Credit Scheme (S$39m), partially erased by higher stock obsolescence (-S$26m). 2010 earnings have to make do without such assistance and would have to depend on: 1) a sustainable Aerospace recovery; 2) major overseas contract wins for Land Systems; and/or 3) M&A growth. STE is trading at 20.1x CY10 P/E, above its 5-year average of 18x. We find it difficult to turn positive at this point.
STEng – BT
ST Engineering enjoys 27% rise in Q4 profit
Revenue up 9%; proposes final dividend of 10.28 cents per share
ST Engineering posted a 27 per cent increase in its net profit for its fourth quarter ended Dec 31, 2009, from $102.3 million to $129.7 million, yesterday.
Revenue for the same period rose 9 per cent from $1.35 billion to $1.47 billion.
For FY2009, net profit dipped 6.3 per cent to $443.9 million even though revenue rose 3.8 per cent year-on-year to $5.5 billion.
A higher allowance for stock obsolescence in FY2009 – $48.7 million compared with $22.5 million in FY2008 – had been charged to the group’s profit from operations.
‘The group continued to secure contracts and replenish its book order which ended 2009 at $10.3 billion. Despite the ‘Great Recession’ in 2009, the group continued to invest in capacities and new capabilities across its global facilities, and added new customers,’ said Tan Pheng Hock, ST Engineering’s president and chief executive officer.
Out of that $10.3 billion, about $3.7 billion is expected to be delivered this year.
ST Engineering’s aerospace segment dipped 3 per cent in revenue to $1.87 billion year-on-year, because of lower turnover in its aircraft maintenance and modification and component/engine repair and overhaul business groups.
The group’s electronics sector grew the most in FY2009 compared to its other sectors, increasing 20 per cent from $1.1 billion to $1.37 billion in terms of turnover, boosted by milestone completions of the Circle Line project and sales of satellite communication products and electro-optics equipment.
Its land systems sector, however, shrank 8 per cent, from $1.3 billion to 1.2 billion over the same period, attributed mainly to lower sales from the automotive business group’s US operations.
Earnings per share stood at 14.74 cents per share for FY2009, down from 15.74 cents per share for FY2008.
A final dividend of 10.28 cents per share was proposed, compared with the 12.8 cents per share from the year before that.
Including the interim dividend of 3 cents per share, the total dividend for FY2009 will stand at 13.28 cents per share, compared with FY2008’s 15.8 cents per share.
The group expects to achieve a higher turnover and a comparable profit before tax figure for FY2010 compared with FY2009, barring unforeseen circumstances.
The group’s land systems and marine sectors look especially promising, with both their turnovers and profit before tax expected to be higher in FY2010.
‘If the economy picks up this year, we are well-poised to ride the market growth because of our well-established presence in several regions,’ said Mr Tan.
STEng
All the data are extracted from the results (please counter-check in case of error),
|
|
Q408 |
FY08 |
Q109 |
Q209 |
Q309 |
Q409 |
FY09 |
|
Revenue |
1,346,414 |
5,344,515 |
1,318,191 |
1,408,942 |
1,351,820 |
1,468,834 |
5,547,787 |
|
Gross Profit |
288,042 |
1,156,912 |
245,102 |
288,143 |
302,416 |
314,544 |
1,150,205 |
|
Operating Profit |
89,801 |
535,993 |
93,856 |
130,174 |
141,387 |
142,409 |
507,826 |
|
PBT |
88,947 |
540,702 |
111,331 |
139,245 |
149,089 |
146,894 |
546,559 |
|
Net Profit |
106,857 |
488,763 |
87,371 |
112,383 |
126,941 |
129,702 |
456,397 |
|
NPM |
7.94% |
9.15% |
6.63% |
7.98% |
9.39% |
8.83% |
8.23% |
|
Cash |
818,925 |
<- |
785,666 |
937,716 |
1,559,478 |
1,513,610 |
<- |
|
Loan – NCL |
289,249 |
<- |
657,527 |
663,523 |
1,364,662 |
1,353,134 |
<- |
|
Loan – CL |
585,002 |
<- |
247,636 |
233,988 |
88,443 |
85,573 |
<- |
|
NAV (ct) |
52.70 |
<- |
57.10 |
46.70 |
47.90 |
52.09 |
<- |
|
EPS (ct) |
3.39 |
15.82 |
28.40 |
3.62 |
4.01 |
4.31 |
14.78 |
|
DPS (ct) |
12.90 |
15.80 |
— |
3.0 |
— |
10.28 |
13.28 |
Notes :
- All figures in S$,000 unless otherwise stated
- FY is End-Dec
Yield Stocks – BT
Analysts still in favour of high-dividend stocks
Telecommunications sector cited as the space to watch for such plays
HIGH-dividend stocks have yet to fall out of favour with some analysts, even though markets have climbed.
In fact, investors might do well to hang on to some dividend-rich stocks this year, they say. Not only might the payouts account for a large part of returns, they might also provide shelter from the vagaries of the market.
A Citi Investment Research report on Feb 8 noted that in the past 10 years, equities in Asia ex-Japan have generated a compounded total return of just 5.9 per cent per annum in US dollar terms, 46 per cent of which came from dividends. ‘This is too large a number to walk away from,’ said strategists Markus Rosgen and Elaine Chu.
And in a year when equity returns are not expected to be stunning, dividends will matter even more, Citi said.
This view is shared by UBS executive director and head of wealth management research Singapore Hartmut Issel.
Mr Issel points out that in a period following an economic turnaround, returns typically range from 10-13 per cent. ‘In such an environment, similar to what we are expecting for 2010, a 5 or 6 per cent yield renders dividend names more interesting,’ he said.
For sample stocks that UBS put to a test, ‘this would account for about half the total return for the year and may mean the difference between beating the benchmark index or trailing it’.
Furthermore, equity mar-kets were still jumpy and investors might derive greater assurance from dividends in hand than from capital gains that may not materialise.
In the past few weeks, for instance, the local stock market has dipped following news of China’s bank lending restrictions, US President Barack Obama’s plan to limit big banks’ businesses and sovereign debt problems in Europe.
‘We expect the equity risk premium to be higher now,’ said DBS Vickers research head Janice Chua. ‘We are seeing more of the defensive and high-yield stocks holding better than high-beta stocks.’
UBS’s Mr Issel also noted that high-dividend stocks may produce ‘decent’ capital gains this year.
All the analysts cited the telecommunications sector as the space to watch for high-dividend plays. Citi picked StarHub and MobileOne (M1) from this industry. DBS Vickers’ favourites are Singapore Telecom and and M1.
StarHub has been in the spotlight over its commitment to pay at least five cents per share every quarter as dividends – some have questioned whether it can maintain this payout in the long term.
Other dividend-rich counters identified include ST Engineering, Singapore Press Holdings, Ascendas India Trust, Mapletree Logistics Trust, Venture Corp and SIA Engineering.
But at the end of the day, before buying that high-dividend or high-growth stock, investors should consider what their risk profiles are, said Aberdeen Asset Management investment manager Christopher Wong.
‘If the risk appetite is lower for certain investors, they may want to consider more dividend-type stocks,’ he said.
STEng – DBS
ST Engineering bids for Indian defence contracts worth US$3bn
At a press conference in New Delhi last week, ST Kinetics, the Land Systems subsidiary of ST Engineering, said that it has bid for five Indian defence contracts worth USD 3 billion and is keen to set up a manufacturing base in the country. The tenders comprise two artillery gun projects and a light strike
vehicle for the army and two carbine rifle projects for internal security. ST Kinetics will begin field trials for the Indian Army next month of its 155 mm Towed Howitzer, where it will compete against the Bofors guns. The company is also hopeful that the stalled trial of the 155 mm Pegasus Lightweight Howitzer (LWH) will also recommence very shortly.
While the original tenders were floated last year, the trials had been put on hold till now, following the arrest of an Indian official for corruption charges in May 2009 – which had resulted in the apparent “blacklisting” of seven defence firms including ST Kinetics as the CBI was investigating their role in the charges. Last month, the defence ministry allowed field trials involving these companies and now ST Kinetics has affirmed that they were never blacklisted by India. We view this as a positive development, as it now allows STE to participate in the Indian Army’s urgent armament upgrade plans. India is upgrading its largely Soviet-era arsenal to counter potential threats from Pakistan and China. The Indian army needs new weapons urgently as its last major acquisition of Bofors Howitzers, was way back in 1986.
Among the other tenders, ST Kinetics will also bid to supply the Bronco All Terrain Tracked Carrier for frontline defence and disaster relief applications. According to ST Kinetics’ management, if all five tenders STE have bid for come through, it will generate additional revenue of USD 3 billion over five years. The Company also hopes to rake in USD 1 billion from nondefence business in India over 3-5 years, mainly through selling specialty vehicles used in mining, excavation and road construction. This is in line with our belief that STE will continue to benefit from increased government spending on defence and infrastructure in the region. Thus, we maintain our positive view on STE’s orderbooks and revenues, going forward, and continue to expect double digit earnings growth rates over FY09-11. Maintain BUY, TP S$3.80.