STEng – BT
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.
ComfortDelgro – Lim and Tan
• There is little in Comfort Delgro’s Q4 results (net profit almost unchanged at $54.6 mln) to enthuse investors, other than perhaps the moderate 0.13 cent / 5% increase in final dividend to 2.8 cents (reflecting the 4.1% profit increase for the full year), and bringing the total for the year to 5.5 cents vs 5.3 cents for 2009. Yield is 3.5% @ $1.56. (SMRT, at $2.04 offers a superior 4.2% yield based on 8.5 cents for the 12 months to Sept ’10.)
• Operationally, there is also little to suggest Comfort Delgro is about to break out of its tight price range: since mid ’09, the stock has, with brief exceptions, largely traded between $1.45-1.54. The recent high was $1.69 reached a year ago.
• One of the reasons for our lack of enthusiasm is the group’s regional diversification (buses and taxis in UK, China, Australia), which does not appear to have found favor with local investors either despite BUY calls by many. Indeed, the latest period was affected by the weakness of sterling pound and to some extent renminbi.
• We maintain the only company within the group worth investing in is Vicom, which however is so thinly traded.
• Prospects for the vehicle inspection business remain strong given the age profile of vehicles in Singapore, as well as the sharp drop in vehicle deregistrations.
• Vicom declared a special dividend of 3.2 cents for 2010, bringing the total to 16.1 cents (vs 11.8% for 2009) for a yield of 5.3% at $3.01 yesterday. The stock, not surprisingly is at its highest since listing in 1995.
• Vicom, which has 87.17 mln shares outstanding, is 68.19% owned by Comfort Delgro and 3.44% by Fidelity Management.
ComfortDelgro – Lim and Tan
• There is little in Comfort Delgro’s Q4 results (net profit almost unchanged at $54.6 mln) to enthuse investors, other than perhaps the moderate 0.13 cent / 5% increase in final dividend to 2.8 cents (reflecting the 4.1% profit increase for the full year), and bringing the total for the year to 5.5 cents vs 5.3 cents for 2009. Yield is 3.5% @ $1.56. (SMRT, at $2.04 offers a superior 4.2% yield based on 8.5 cents for the 12 months to Sept ’10.)
• Operationally, there is also little to suggest Comfort Delgro is about to break out of its tight price range: since mid ’09, the stock has, with brief exceptions, largely traded between $1.45-1.54. The recent high was $1.69 reached a year ago.
• One of the reasons for our lack of enthusiasm is the group’s regional diversification (buses and taxis in UK, China, Australia), which does not appear to have found favor with local investors either despite BUY calls by many. Indeed, the latest period was affected by the weakness of sterling pound and to some extent renminbi.
• We maintain the only company within the group worth investing in is Vicom, which however is so thinly traded.
• Prospects for the vehicle inspection business remain strong given the age profile of vehicles in Singapore, as well as the sharp drop in vehicle deregistrations.
• Vicom declared a special dividend of 3.2 cents for 2010, bringing the total to 16.1 cents (vs 11.8% for 2009) for a yield of 5.3% at $3.01 yesterday. The stock, not surprisingly is at its highest since listing in 1995.
• Vicom, which has 87.17 mln shares outstanding, is 68.19% owned by Comfort Delgro and 3.44% by Fidelity Management.
ComfortDelgro – Phillip
Within our expectations
•FY10 revenue came in at S$3,206m (+5.1% y-y) while net profit was up 4.1% y-y to S$228.5m, both were inline with our expectations
•Growth across all segments especially Australian Bus business
•Forecasting revenues and net profits of S$3,285m and S$224m for FY11
•Maintain Buy recommendation with fair value of S$1.81
FY10 results were inline with our estimates
Revenue was up 5.1% y-y to S$3,206.9m due to broad based growth across most segments especially the Australia bus business whose revenues increased by 35.1% y-y. Revenues could have been higher by S$51m but was affected by the weaker pound and RMB. Operating profit was up 11.0% due to the increase in revenue and smaller increases in operating expenses. Operating margin also improves to 12.1% from 11.5% despite the inflationary environment and high crude oil prices. Net profit came in at S$228.5m (+4.1% y-y). FY10 results were inline with our estimates; revenues were slightly higher than our estimates of S$3,205m and net profit was marginally lower than our estimates of S$230m. CDG also announces a final dividend of S$0.028 bringing the total dividends for FY10 to S$0.055 translating to a dividend yield of 3.5%.
Forecasting revenues and net profits of S$3,285m and S$224m for FY11
We are forecasting for revenues to come in S$3,285m and net profits of S$224m for FY11 due to the high inflationary environment and higher fuel and energy costs. Based on FY10 results, fuel and staff costs contributed about 43.5% of their total operating expenses. Furthermore public transport operators will not be able to increase their fares for the rest of the year as the fare revision exercise has been postponed to the 4th quarter of 2011. On the back of these factors, we are forecasting the net profit to come in at S$224m for FY11 which is 2% lower than that of FY10. Nevertheless, valuation for CDG still looks attractive at the current price.
Outlook for the rest of the year
Record tourism arrivals will continue to contribute strongly to the growth of its Singapore taxi business for FY11. Australia bus business will continue to improve as they increase the number of services, management also revealed that they are bidding for more services in Australia. Singapore rail and bus ridership will continue to improve with the improved connectivity of public transport and the high costs associated with owning a car.
Valuation and Recommendation
We are reiterating our Buy recommendation and fair value of S$1.81 on CDG to reflect the broad based growth across its entire business segment and its attractive valuation at the current moment. CDG is currently trading at a PE of 14.6X FY10 EPS as compared to SMRT which is trading at 19X FY10 which we think that CDG is very undervalued at the current moment. Our fair value translates to 17.3X FY11E EPS.
ComfortDelgro – Phillip
Within our expectations
•FY10 revenue came in at S$3,206m (+5.1% y-y) while net profit was up 4.1% y-y to S$228.5m, both were inline with our expectations
•Growth across all segments especially Australian Bus business
•Forecasting revenues and net profits of S$3,285m and S$224m for FY11
•Maintain Buy recommendation with fair value of S$1.81
FY10 results were inline with our estimates
Revenue was up 5.1% y-y to S$3,206.9m due to broad based growth across most segments especially the Australia bus business whose revenues increased by 35.1% y-y. Revenues could have been higher by S$51m but was affected by the weaker pound and RMB. Operating profit was up 11.0% due to the increase in revenue and smaller increases in operating expenses. Operating margin also improves to 12.1% from 11.5% despite the inflationary environment and high crude oil prices. Net profit came in at S$228.5m (+4.1% y-y). FY10 results were inline with our estimates; revenues were slightly higher than our estimates of S$3,205m and net profit was marginally lower than our estimates of S$230m. CDG also announces a final dividend of S$0.028 bringing the total dividends for FY10 to S$0.055 translating to a dividend yield of 3.5%.
Forecasting revenues and net profits of S$3,285m and S$224m for FY11
We are forecasting for revenues to come in S$3,285m and net profits of S$224m for FY11 due to the high inflationary environment and higher fuel and energy costs. Based on FY10 results, fuel and staff costs contributed about 43.5% of their total operating expenses. Furthermore public transport operators will not be able to increase their fares for the rest of the year as the fare revision exercise has been postponed to the 4th quarter of 2011. On the back of these factors, we are forecasting the net profit to come in at S$224m for FY11 which is 2% lower than that of FY10. Nevertheless, valuation for CDG still looks attractive at the current price.
Outlook for the rest of the year
Record tourism arrivals will continue to contribute strongly to the growth of its Singapore taxi business for FY11. Australia bus business will continue to improve as they increase the number of services, management also revealed that they are bidding for more services in Australia. Singapore rail and bus ridership will continue to improve with the improved connectivity of public transport and the high costs associated with owning a car.
Valuation and Recommendation
We are reiterating our Buy recommendation and fair value of S$1.81 on CDG to reflect the broad based growth across its entire business segment and its attractive valuation at the current moment. CDG is currently trading at a PE of 14.6X FY10 EPS as compared to SMRT which is trading at 19X FY10 which we think that CDG is very undervalued at the current moment. Our fair value translates to 17.3X FY11E EPS.