ST Engineering

ST Engineering: FY12 results were overall in-line with Street estimates. Earnings increased 9.2% y/y to $576m, revenue increased 6.5% y/y to $6.4b. Pretax profit was higher at all of its divisions, with a solid performance by the Aerospace sector, where operating margins improved to 13.5% in FY12 from 12.6% in FY11, but was offset by allowance for doubtful debts of S$22 mn in FY12. The company announced a special dividend of 9.8¢ above a final dividend of S¢4.0, bringing the total dividend in FY12 to $0.168; indicative yield of 4.4%. End 2012 orderbook of $12.1b, with $4.3b deliverable this yr; cash $1.7b. Mgmt guided for a stronger PBT in 2013, led by the aerospace, electronics and marine divisions. CIMB notes that STE enjoys the best of both worlds: growing commercial sales (63% of group total) and wild cards from defence contracts. Group also announced chairman Peter Seah will step down on 25 Apr 2013, and will be succeeded by Kwa Chong Seng, an independent non-executive director at STE since 1 Sep 2012. DB noted that the outlook for Marine also appears healthy, as it works through the vessels currently on hand and begins design work on the major Singapore Navy contract which was recently won. FY13 should be a busy year for Electronics as it fulfills the local and regional contracts on hand. CS maintains UNDERPERFORM, but increase TP to $3.10; DB has a BUY rating with TP of $4.30; CIMB has an OUTPERFORMED rating and increased TP to $4.29; OCBC maintains a HOLD with TP of $4.12;