Despite ST Engineering’s significant outperformance vs the STI year-to-date, the stock offers a safe haven in turbulent times and it can climb further, OCBC says.
“STE’s earnings are fairly stable given its four main diversified businesses, which help to reduce its exposure to sector-specific risks. With an attractive FY12F dividend yield of around 4.8%, STE should continue to perform in today’s uncertain but liquidity-rich global economic environment.”
It notes STE’s orderbook stood at $12.9 billion at end-1H12 and expects it will be above $13 billion by end-3Q12, adding it projects continued orderbook growth. It notes the orderbook grew 16% p.a. between end-2005 and end-2010, while annual revenue grew 6% p.a. from FY06-FY11, suggesting the average contract tenure has been increasing and implying increasing earnings visibility.
It raises its fair value to $3.81 from $3.50, after rolling forward to blended 2H12-1H13 EPS and raising its P/E multiple to 20.5x from 20x; it keeps a Buy call. The stock is up 1.4% at $3.52, outperforming the STI’s 0.3% rise.
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