ST Engineering - CGS-CIMB Research 2023-03-16: Margins At Inflection Point

• We believe all three ST Engineering (SGX:S63)'s business segments are on track for margin recovery in FY23F.
  • Urban Solutions & Satcom (USS) will see a full-year consolidation from Transcore and tapering integration & transaction costs.
  • - Read this at SGinvestors.io -
  • Defence and Public Security (DPS) whose margins were hit by higher energy costs in 2H22, should see some reprieve in addition to the absence of ~US$60m (S$80m) in annual losses with its exit from the US Marine business.
• All in, we forecast ST Engineering’s EBIT margin to hit 9.4%, similar to its 2019 pre-COVID level of 9.3%.

Why did ST Engineeting’s share price underperform?

• - Read this at SGinvestors.io -
• total debt rising to S$6.2bn in 1H22 and related finance costs; and
• earnings accretion from Transcore acquisition yet to be seen (to come in 2H23F).
• With ST Engineering’s profile likely transforming from dividend yield to durable growth, and its impending margins recovery, we think FY23F could be an inflection point.

Defence still an angle

• Read more at SGinvestors.io.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.

Read also CGS-CIMB's most recent report:
2024-02-12 ST Engineering - Longer-term Growth Drivers Intact.

Previous report by CGS-CIMB:
2023-11-10 ST Engineering - Set For A Stronger FY24.

Price targets by 7 other brokers at ST Engineering Target Prices.

Listing of research reports at ST Engineering Analyst Reports.

Relevant links:
ST Engineering Share Price History,
ST Engineering Announcements,
ST Engineering Dividend Payout Dates & Corporate Actions,
ST Engineering News