Morningstar

Morningstar, Inc.

Equity Bottom-Up

Although Singapore Technologies Engineering's full-year revenue growth came in slightly below our forecasts at 2.7%, we are pleased with net profit growth (excluding oneoff charges) of 9.2% year over year, helped primarily by a cyclical upswing in the marine and land businesses. We've increased our fair value estimate slightly to SGD 3.76, mainly due to a stronger recovery for the marine and land segments. We remain positive on the long-term outlook for the company as it moves up the value chain…

While Singapore Technologies Engineering's third-quarter revenue was flat, slightly better profitability and timing factors point to full-year performance that should be in line with our expectations. We tweak our earnings projections and raise our fair value estimate to SGD 3.74, largely due to time value. We continue to like the direction that the firm is headed in as it moves up the value chain to provide more original equipment products to supplement its MRO services and as it builds scale…

We think Singapore Technologies Engineering’s, or STE’s, purchase of MRA Systems, or MRAS, is positive, with returns looking to be accretive and cash flow contribution positive, leading to a rise in our fair value estimate to SGD 3.68 from SGD 3.60. Our revised fair value estimate factors in the ramp-up in the delivery of the Airbus A320neo, for which the nacelles produced by MRAS jointly with Safran are the sole source for the CFM Leap-1A engine. We also include MRAS’ underfunded pension into…

We raise our fair value estimate for Singapore Technologies Engineering, or STE, to SGD 3.60 from SGD 3.40 as we reflect on strategies from the firm that should begin to materially drive earnings growth over the next five to 10 years. Some of this upside is already reflected in the company’s current share price, so a larger buffer is preferred versus risk, but the company’s 4% dividend yield remains attractive. Our narrow moat and stable moat trend ratings are intact. STE’s second-quarter…

ST Engineering's, or STE's, inaugural investor day indicated management is looking for revenue to grow just over 7% annually over the next five years, which is in line with our estimate. Smart City-related projects and products will be the key driver, with close to a 15% revenue CAGR projected to 2022, while other activities should collectively grow at around 5%-6%. Management was cautious, with its margin guidance suggesting no improvement, whereas we think some margin expansion is possible. We…

Singapore

ST Engineering is a global technology, defence and engineering group with offices across Asia, Europe, the Middle East and the U.S., serving customers in more than 100 countries. The Group uses technology and innovation to solve real-world problems and improve lives through its diverse portfolio of businesses across the aerospace, smart city, defence and public security segments. Headquartered in Singapore, ST Engineering reported revenue of $7.9b in FY2019 and it ranks among the largest companies listed on the Singapore Exchange. It is a component stock of the FTSE Straits Times Index, MSCI Singapore, iEdge SG ESG Transparency Index and iEdge SG ESG Leaders Index.

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