ST Engineering

ST Engineering: Counter was up almost 5% on Friday. We note of a growing interest in ST Engineering (STE) by several broking houses (notably Deutsche, CIMB and Citi) over the past week. STE is a conglomerate well-positioned to ride out the current uncertain economic climate, supported by its defensive earnings profile and visible cash flows. STE’s strong order book of c.$13b provides strong revenue visibility over the next two to three years. The group is also expected to benefit from a stronger USD, with c.27.3% of group sales derived from customers in USA. If the greenback continues to strengthen, this could result in higher earnings via FX translation gains. STE’s 90% payout ratio translates to a dividend yield of c.4.9%, which could buffer against any further weakness in share price.