Thursday, June 12, 2014
STE
STE: UOBKH guides STE as a proxy to US recovery, citing various economic data suggesting US economic recovery is gathering pace.
STE derives 26% of its revenue from US, via aerospace and shipbuilding activities and speciality vehicles sales. In addition, the increased investment in the US should pay off in the coming years for MRO ops, shipbuilding and soon from ship repair ops. If asse utilization reverst to 2012 levels, UOBKH expects revenue from US to possibly grow by 16% over next 2 years, leading to a mid-high single-digit CAGR growth over the next 2 years. UOB cites that it currently still assumes a 2.8% CAGR for the same period
UOBKH also draws attention to STE’s record orderbook of $13.6b, but market cap is just trading at 0.9x order book, well below long term mean of 1.06x
UOBKH maintains Buy with TP of $4.50
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