ST Engineering

ST Engineering: Q15 net profit was flat at $140.8m as stronger performances in other segments were offset by shipbuilding weakness. This brought FY15 earnings to $529m (-0.5%), falling within street estimates.

Revenue slipped 3% y/y to $6.33b, largely depressed by the oil-hit marine segment (-29%). Commercial sales remained stable at $4b or 64% of total revenue.

Segment highlights:
Aerospace - Pretax profit climbed 3% to $290.6m as revenue edged up 1% to $2.1b. Stronger performances in engineering & materials services, as well as component/engine repair & overhaul were offset by lower aircraft maintenance & modification works. Bottom line was partially shored by lower operating expenses, negative goodwill, and associates’ FX gains.

Electronics - Pretax profit of $191m (+4%) was buoyed by higher revenue of $1.7b (+8%), underpinned by project milestone completions from software systems and increased satcom sales. Bottom line was partially offset by less favourable product mix and higher expenses.

Land systems - Pretax profit advanced 16% to $65m, due to lower inventory provisions and goodwill impairment, offset by unfavourable product mix. Revenue was flat at $1.4b

Marine: Pretax profit sank 28% to $88.3m in tandem with the 29% revenue slump to $958m, due to lower recognition from shipbuilding contracts from both local and US operations.

Management guided that FY16 pretax earnings would be comparable to FY15, with steady performances in the aerospace and electronics sectors, while marine and land systems are expected to lag.

The group declared a final and special DPS totaling $0.10, taking FY15 payout to $0.15 (unchanged).

ST Engineering is currently trading at 16.2x FY16e consensus P/E against historical 13-24x valuation range, and offers a defensive 5.3% dividend yield.