ST Engineering rises on freighter aircraft leasing JV with Temasek
ST Engineering saw shares rally 1.6% after it announced a new 50-50 joint venture (JV) with Temasek.
- Singapore Technologies (ST) Engineering Ltd (SGX: S63) share price hits a high of S$3.77 on Wednesday (12 May 2021)
- This comes on the back of a new 50-50 JV agreement with Temasek for freighter aircraft leasing
- The JV will aim to build a portfolio valued at about S$800 million
- It is ‘not expected to have any material impact’ on consolidated net tangible assets per share and earnings per share for the current financial year
- Buy and sell ST Engineering stocks with an IG account
ST Engineering share price: What’s the latest?
ST Engineering shares rose as much as 1.6%, a day after announcing that its wholly-owned aviation asset management unit has entered into an 50-50 JV agreement with Temasek for freighter aircraft leasing.
The JV will ‘address the growing demand for freighter aircraft 1 as e-commerce and air cargo volumes expand across the globe’, according to a press release.
It aims to build a portfolio valued at about US$600 million (or about S$800 million) within five years, and will invest in passenger aircraft to be converted into highly efficient freighters.
ST Engineering said that the setting up of this JV is ‘not expected to have any material impact’ on the group’s consolidated net tangible assets per share and earnings per share for the current financial year.
The counter is down 2.6% year to date. Analyst sentiments published by SGX StockFacts show a consensus rating of ‘neutral’ alongside a 12-month price target of S$4.07 on the stock.
The price target represents an upside of 9.1% from the stock’s last traded price of S$3.73.
What are the details of the JV?
On the supply side, the JV expects to purchase passenger aircraft feedstock at lower prices as passenger aircraft value has been affected by travel restrictions arising from the Covid-19 pandemic.
The JV intends to finance these aircraft through a mix of equity and debt.
Operationally, ST Engineering will provide the associated maintenance, repair and overhaul services to these aircraft. The group will also be the asset and lease manager to the JV, which complements its existing aviation asset management business model.
The portfolio will primarily comprise narrowbody aircraft that will provide an option to operators to reuse older passenger aircraft by giving them a new lease of life as fuel efficient freighters.
This is in line with the JV’s focus to implement an environmental, social and governance (ESG) policy to guide its operations and business development.
The JV will set relevant ESG criteria for its investments and work with prospective clients on measures to reduce their carbon footprint, including the use of sustainable aviation fuels and enhanced engine maintenance programmes.
Trade Singapore’s most popular stocks with IG - long or short
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Explore the markets with our free course
Learn how shares work – and discover the wide range of markets you can trade on – with IG Academy's free ’introducing the financial markets’ course.
Put learning into action
Try out what you’ve learned in this shares strategy article risk-free in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Trade on over 16,000 popular global stocks
- Protect your capital with risk management tools
- React to breaking news with out-of-hours trading on 70 key US stocks
Inspired to trade?
Put your new knowledge into practice. Log in to your account now.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.