ST Engg

ST Engg: steady growth in 3Q12 results. Revenue, operating and net profit all showed yoy improvement. All sectors (aerospace, electronics and land systems) recorded revenue growth except for the marine sector. Electronics and Land Systems showed the greatest improvement in profitability driven by favorable pdt mix. The Marine division posted a 7% yoy decline in revenue, attributed primarily to lower revenue recognition from shipbuilding contracts. The unit’s pretax profit fell at a slower 3% on lower write back of allowance of doubtful debts. But mgt says it is not perturbed and expects the unit to benefit from continued offshore exploration activities. STE’s orderbook stands at $12.5b, down slightly 1.6% qoq. Nevertheless order momentum remains strong, with $1b orders won in 3Q12. STE will recognize $1.5b in orders in 4Q12 vs $0.9b in 3Q12, which should lead to a qoq increase in revenue. Overall STE guided for higher revenue and pretax profit for FY12. UOBK maintains Buy with TP $3.85, raises final div est by 0.5cts to 17cts. Deutsche keeps at Buy, lifts TP from $3.70 to $3.95, says STE offers an attractive div yield of 5% and prospects appear healthy. Credit Suisse however keeps at Underperform with TP $2.68, says the stock is expensive at 21x FY12e P/E.