ST Engineering Profits from Land Systems and Marine Sectors Declined

ST Engineering Logo

Singapore Technologies Engineering Ltd (ST Engineering) announces its 1Q2016 financial results on 13th May 2016. Revenue was 8% higher in 1Q2016 as compared with 1Q2015 due to higher sales from Aerospace and Electronics sectors. However, net profit after tax (Net profit) for the Group was $110.2m, down 15% from $130.0m as profits from Land Systems and Marine sectors declined. Earning per share fell 15% from 4.17 cents to 3.53 cents.

Revenue from Aerospace and Electronics sector are 27% and 28% higher respectively. Revenue for Land Systems and Marine sector decline by 18% and 24% respectively. Revenue from Marine sector remains weak due to lower demand for ship building from local and U.S. operations.

Order book was $11.5b at the end of March 2016, of which the Group expects to deliver about $3.0b in the remaining months of 2016.

FINANCIAL HIGHLIGHTS
For the first quarter ended
31 March 2016
2016
1Q
2015
1Q
Growth
%
Revenue ($m) 1,627 1,511 8
Earnings before interest and tax (EBIT) ($m) 97.2 110.1 (12)
Other income, net ($m) 22.1 20.8 6
Finance (costs)/income, net ($m) (11.5) 8.5 (234)
Profit before tax (PBT) ($m) 130.4 150.5 (13)
Profit attributable to shareholders ($m) 110.2 130.0 (15)
Earnings per share (cents) 3.53 4.17 (15)

The stock price for ST Engineering closed at S$3.08 today.

ST Engineering Contract Win with TERREX 2

Terrex 2

On 17th March 2016, ST Kinetics, the land systems arm of ST Engineering announces that they have been awarded the contract for 13 prototypes of the amphibious combat vehicle Terrex 2 by the US Marine Corps. The 13 Terrex 2 prototypes would be tested next year.

The contract that was awarded to ST Engineering (STE) and partner Science Applications International Corp (SAIC) was worth US$121.5 million. If the US Marines select the Terrex 2, a further contract will be awarded for the building of another 204 vehicles at an average procurement price of up to US$6.5 million per vehicle (Total worth US$1.3 billion)

Competition

During the tenders for the US Marines contract, ST Engineering and BAE Systems are the two firms selected to build prototypes. BAE Systems was awarded a smaller US$103.8m contract for the SuperAV vehicles.

ST Engineering Announces Final Dividend of 10 cents

ST Engineering Logo

ST Engineering announces its financial year 2015 results on 26th February 2016. Revenue fell slightly by 3% from 6,539 million to 6,335 million dollars. Earnings per share fell slightly from 17.06 cents to 17.05 cents.

With the announcement of final dividend of 10 cents, this brings the total dividend for FY15 to 15 cents which is the same as FY14. Personally, I felt the results are pretty good given the weakness in the Marine sector. Currently, ST Engineering is the largest percentage holding in my portfolio by invested amount.

Financial Results FY2015

For the year ended 31 December 2015 FY15 FY14 Growth %
Revenue ($m) 6,335 6,539 (3)
Earnings before interest and tax (EBIT) ($m) 510.3 555.0 (8)
Other income, net ($m) 55.5 40.2 38
Finance income/ (costs), net ($m) 6.2 (1.7) 479
Profit before tax (PBT) ($m) 630.3 650.7 (3)
Profit attributable to shareholders ($m) 529.0 532.0 (1)
Earnings per share (cents) 17.05 17.06
Economic value added (EVA) ($m) 366.2 344.5 6
Return on equity (%) 24.8 24.9 NM
Dividend per share (cents) 15.0 15.0
Final 10.0 11.0
Ordinary 5.0 4.0
Special 5.0 7.0
Interim – Ordinary 5.0 4.0

Revenue

Revenue for ST Engineering comes mainly from 4 segments. They are Aerospace, Electronics, Land Systems and Marine. A small percentage comes from others. The electronics segment did well. Given the current market weakness in Marine, you can see the revenue from its Marine segment fell significantly by 29%.

$m FY2015 % FY2014 % Change %
Aerospace 2,090 33 2,061 32 1
Electronics 1,709 27 1,583 24 8
Land Systems 1,396 22 1,397 21
Marine 958 15 1,341 21 (29)
Others 182 3 157 2 16
Group 6,335 100 6,539 100 (3)

Dividends

At the average share price of $3.21 and total dividends of 15 cents, the dividend yield is at 4.68%. Do note that dividend yield for you may be different depending on the price you buy the stock at. (Dividend yield = Total Dividends/Share Price Bought)