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

ST Engineering - 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.
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    • 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?

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  • 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

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Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LIM Siew Khee CGS-CIMB Research | Kenneth TAN CGS-CIMB Research | 2023-03-16

Previous report by CGS-CIMB:
2023-02-24 ST Engineering - Improving Outlook.

Price targets by 5 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 Dividends & Corporate Actions,
ST Engineering News Articles

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