ST Engineering

ST Engineering: 3Q13 net profit was lower 10.3% y/y to $131.4m, attributable to an impairment charge of S$23.7m from ROPAX contract, partially offset by write-back of provisions of S$14.4m. Revenue remained relatively flat at $1.5b. Marine revenue rose 25% y/y (-5% q/q) to $296m but that was more than offset by the decrease in revenue from Land Systems (-11% y/y, -11% q/q) at $348m and “Others” (-33% y/y, +33% q/q) at $46m. Revenue from Aerospace (+1% y/y, +1% q/q) and Electronics (+3% y/y, -1% q/q) remained relatively flat at $510m and $350m respectively. MBKE views this set of results as poor and expects weak in stock sentiments near term. The house advises to wait for a better entry point. MBKE also highlights potential major contract win for the US Coast Guard could be delayed. Credit Suisse says that weak business sentiment across the US, Europe and China impacted demand, and highlights that US government shutdown is likely to impact the group indirectly through delayed sales contracting. CIMB takes the same outlook, but favours STE for its solid balance sheet, dividend yield, and orderbook. MBKE agrees that order book of $12.5b is strong, but highlights it is marginally lower than 1Q13: SGD13.0b & 2Q13: SGD12.7b. Latest broker ratings as follows: MBKE cuts to Hold from Buy, with TP $4.80 CS maintains U/PF with TP: $3.40 CIMB maintains Outperform with TP: $4.70 OCBC maintains Hold with TP increased to $4.32 from $4.11 Deutsche maintains Buy with TP cut to $4.70 from $4.45