STE

STE: DBSV maintains Buy with $4.80TP. House note that recent sell-down is unjustified and stock offers upside from US recovery, backed by an attractive yield. Visible growth drivers in place at Aerospace, Marine divisions; in Asia as well as in the US, while Strong balance sheet and net cash position drive M&A ambitions. Add that the grp is a beneficiary if interest rate rises and is aproxy to recovery in the US and appreciating US$. We note that the latest view by DBSV gels well with the street, where we noted last week of growing interest in ST Engineering (STE) by several broking houses 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. The Street has 7 Buy Calls, 6 Holds and 1 Sell rating with a mean TP of $4.41.