ST Engineering - RHB Invest 2023-05-09: Strong Long-Term Earnings Growth; Keep BUY

ST Engineering - Strong Long-Term Earnings Growth; Keep BUY

ST Engineering (SGX:S63) | SGinvestors.ioST Engineering (SGX:S63)
  • ST Engineering is guiding for a low 3% weighted average cost of borrowing in 2023, slightly higher than our estimate. An increase in our interest cost estimate lowers forecast earnings by 2%.
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  • Keep BUY rating for ST Engineering, with new S$4.05 target price from S$4.10, 11% upside from the current ST Engineering's share price and ~4% yield.

Reiterate our investment thesis for ST Engineering

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  • the urban solutions & satcom (USS) segment experiencing strong growth amid contributions from the TransCore acquisition beyond 2023; and
  • the defence public security (DPS) segment benefiting from rising defence spending in Singapore and in the US.
  • Concerns about its high levels of debt should also be allayed by ST Engineering's capacity to produce a significant free cash flow. During 2023-2025, we anticipate a gradual drop in the net debt to equity ratio.
  • We think that Moody's recent reinforcement of its AAA issuer rating – the highest rating level offered by the credit rating agency – should allay investor worries about ST Engineering's elevated debt levels.

Small tweak to earnings; 2023F profit is below consensus.

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Shekhar Jaiswal RHB Securities Research | 2023-05-09

Read also RHB's most recent report:
2023-12-16 ST Engineering - Order Wins Continue; Reiterate BUY.

Previous report by RHB:
2023-12-15 ST Engineering - Strengthening Its Cyber Capabilities; Keep BUY.

Price targets by 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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