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We recently caught up with the management of Singapore Technologies Engineering Ltd (STE) to get an update on the group. As such, we have fine tuned our earnings model but maintained our FY11 earnings estimate of STE at S$510m. At the same time, we assigned a lower valuation multiple of 19.4x forward P/E on our earnings estimates over the next four quarters to arrive at a fair value of S$3.37 (versus $3.58 previously). The new fair value represents 14.2% upside and we maintain our BUY call. Management maintains STE’s performance in 2H11 will be stronger than in 1H11, barring unforeseen circumstances. STE’s earnings are resilient as a result of 1) its large stable stream of revenue coming from government-related projects 2) its strong order book and sizeable chunk of its non-government business under long-term contracts and 3) its profitable and extremely cash generative business model. Combined with a high dividend yield of 5.1%, these factors provide STE good downside protection. This makes STE a good name to own as the outlook on global equity markets turns uncertain, especially for investors who want to stay invested in equities.
Management confident of a stronger 2H11. We recently caught up with the management of Singapore Technologies Engineering Ltd (STE) to get an update on the group. STE historically has a stronger second half of the year, compared to the first half. Barring unforeseen circumstances, management is confident this will also be the case in 2H11. With STE’s 1H11 net earnings meeting 47.4% of our FY11 estimates, STE looks on track to meet our FY11 expectations, despite a weakening US$.
Earnings model fine-tuned. Nevertheless, our earnings model has been fine-tuned to further segregate STE’s four main segments into their respective sub-segments for greater granularity. (See Exhibits 1 to 5 for a graphical representation of the revenue and pre-tax profit contribution of STE’s four main segments and the respective sub-segments.) Despite this fine-tuning exercise, we have maintained our FY11 earnings estimate of STE at S$510m.
Risks and downside protection. Equity markets around the world have seen higher volatility in recent weeks and talks of the global economy heading for a recession is gathering pace, as investors are more unsure about the near-term outlook. During the equity sell-off in early 2009 caused by the global financial crisis, STE’s implied forward P/E fell by more than two standard deviations below its historical average. However, STE’s earnings are resilient in nature. STE has 1) a large stable stream of revenue coming from government-related projects 2) a strong order book and a sizeable chunk of its non-government business under long-term contracts and 3) a profitable and extremely cash generative business model. Furthermore, STE’s 90% dividend payout policy gives it a high dividend yield of 5.1%. These four factors collectively provide good downside protection, making STE a good name to own if one wants to stay invested in equities. At the current price of S$2.95, STE is priced at 17.0x P/E based on our earnings estimates over the next four quarters. This means STE is already trading at more than one standard deviation below its historical average forward P/E of 19.4x. (See Exhibit 6 for STE’s historical average forward P/E.)
Maintain BUY. Given STE’s resilient earnings, we used its historical average forward P/E of 19.4x against its net earnings estimates over the next four quarters to arrive at a fair value of S$3.37 per share, down from S$3.58 previously. As the new fair value still represents 14.2% upside, we maintain our BUY call.
Good good ! I still holding some and leave it aside for the time being.
bishan22 ( Date: 06-Sep-2011 14:57) Posted:
Haha, me too collected and buy a good dinner for my family even in this bad time. One must know where to put the money to work. Bad or good times, always be happy and never let greed control you. Good luck. 
edchai ( Date: 06-Sep-2011 12:37) Posted:
I collected my dividend too and sold my stocks this morning, but don't expect it goes up to $2.94 thir morning. Actually, I buy / sell few rounds on this stock after the ex-date and the money I made from it already more than dividend 
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never buy dinner and also never sell - too cheap to sell now. :)
Haha, me too collected and buy a good dinner for my family even in this bad time. One must know where to put the money to work. Bad or good times, always be happy and never let greed control you. Good luck.
edchai ( Date: 06-Sep-2011 12:37) Posted:
I collected my dividend too and sold my stocks this morning, but don't expect it goes up to $2.94 thir morning. Actually, I buy / sell few rounds on this stock after the ex-date and the money I made from it already more than dividend
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I collected my dividend too and sold my stocks this morning, but don't expect it goes up to $2.94 thir morning. Actually, I buy / sell few rounds on this stock after the ex-date and the money I made from it already more than dividend
Many take cover at this shit hole, better than the rest. Recently just paid their due dividends.
edchai ( Date: 06-Sep-2011 11:11) Posted:
Overall market sentiment is weak but I believe this company is doing well.
Will look for opportunity to buy some units when the price is low as this counter also has good dividend yield, even not the best but feel safe to invest in this counter.
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Overall market sentiment is weak but I believe this company is doing well.
Will look for opportunity to buy some units when the price is low as this counter also has good dividend yield, even not the best but feel safe to invest in this counter.
STE: CIMB has Technical Sell Call. Note that stock has been forming lower highs and lower lows since hitting a high of $3.50 in Nov10. The recent rebound has taken prices back up to its MA, which has been a decent resistance since that high.
Both indicators are also testing their respective resistance levels and hence there is a high chance of a reversal here. Aggressive traders should go short here with a stop placed above the downtrend resistance line at S$3.00. The gap at $2.93-3.01 could also act as a resistance in the near term. Expect prices to turn lower from here, likely to head back to retest the $2.64 low. Following support is at $2.55. Filling up the $2.83-2.84 gap would likely be the initial signal that prices are headed lower.
Moving to 3.00 soon????
Krisluke .... what was the timeframe you used for your pivot points calculation ?
This counter is funny .... against all odds !
Our pivot point stands at 2.94.
Our preference: the downside prevails as long as 2.94 is resistance.
Alternative scenario: above 2.94, look for 3.06 and 3.13.
Comment: the RSI is below 50. The MACD is negative and below its signal line.
The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (standing respectively at 2.93 and 2.93).
Supports and resistances: 3.06 *2.94 **2.89 2.81 last 2.64 2.58 **2.5 *
Today performance not bad. CD payment is on 2nd Sep.
ST eng, famous for holding many green $, So if usd fall will result china and india facing high inflation...
ST eng, business core was mainly centralised in china and singapore... ...
I believe USD down, Crude oil will shoot up plus winter is comin soon
my personal view
has fundamental change due to exposure to US......seems bad and no longer defensive....
this one, I think gone case.....
just sell.....
Most counters on the way to recovery but ST Eng seems having hard time.....
Why? Anyone has any idea?
as expected ... dividend 3 cents per share
SINGAPORE, July 26 (Reuters) - Singapore Technologies Engineering, the world's largest aircraft repair firm, said on Tuesday its aerospace arm had secured over S$260 million ($215.4 million) worth of maintenance contracts in the second quarter.
The contracts, which range from 3 to 12 months, were for aircraft maintenance and modification, and support work for engines and components, ST Engineering said in a statement.
ST Engineering Releases 2Q2011 Results on 2 August, can we expect a good report ? It share price has gone up lately.
