ST Engineering: Morgan Stanley initiates with O/w rating and $3.70 TP. House note that STE has underperformed the market in the past four yrs, on concerns over earnings growth and aerospace industry decline. Believe earnings are at an inflection point and expect STE to outperform in a volatile environment.
Expect 10% EPS growth in 2012/13 led by Aero and Elec divisions. Orderbook of $12.3bn is at an all-time high, and expect positive trends to continue. DPS is also growing, with payout ratio likely sustained at 90%. At house TP, STE’s shares provide 14% upside and a 4% yield.
Current valuations of 16.6x P/E, 5.0x P/B for 2013e are below 10-year averages and valuation premium to MSCISG has narrowed to 29%, which is attractive.
No comments:
Post a Comment