ST Engineering - Maybank Research 2023-02-26: Minor Speed Bumps Ahead; FY22 Earnings Dragged By Higher Interest Costs

• ST Engineering (SGX:S63)'s FY22 PATMI of S$535m (-6% y-o-y) was below our and consensus estimates, accounting for 93% and 94% of the respective FY22E forecasts. The decline was mainly due to the reduction in government support (S$177m), higher energy inflation (S$30m) and incurred TransCore Transaction & Intergration expenses (S$22m).

Strong Commercial Aerospace (CA) growth offset by weaker Urban Solution (USS) and Defence (DPS)

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• USS (Urban Solution and SATCOM, +49% y-o-y), and
• DPS (Defence and Public Security , +6% y-o-y).

Commercial Aerospace (CA) continues to grow as air travel has recovered to 77% of pre-COVID levels. On the back of aviation recovery and cost savings, earnings increased by 65% despite substantial reduction in government support.

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ST Engineering’s defence business earnings suffered (-13% y-o-y) from energy inflation (S$23m) amidst higher contract wins of US$737m in FY22.

Higher acquisition cost and slower USS growth

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Kelvin Tan Maybank Research | https://www.maybank-ke.com.sg/ 2023-02-26 SGinvestors.io

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