SG: ST Engineering - Higher S$3.50 fair value on strong contract wins

ST ENGINEERING 16 Apr 2012

HIGHER S$3.50 FAIR VALUE ON STRONG CONTRACT WINS - Aerospace won $540m of new contracts - Total of S$1.5b of new orders in 1Q12 - Restores confidence in defence sales ST Engineering (STE) announced that its aerospace arm has secured a total of ~$540m worth of contracts in 1Q12. Together with its recent announcements, STE has announced a total of ~S$1.5b worth of new orders in 1Q12, including ~S$100m of new contracts secured by its electronics segment and a ~S$880m contract to build four patrol vessels for the Royal Navy of Oman. With the contract wins in 1Q12, STE's robust S$12.3b order book at end-FY11 has likely grown further by end-1Q12. Also, the contract with the Royal Navy of Oman should restore investors' confidence in STE's defence sales. STE's recent strong flow of new orders should improve sentiments on its shares. Thus, we maintain our BUYrating on STE with a new fair value of S$3.50/share, from S$3.32/share previously.