Where next for ST Engineering shares following new coronavirus guidance?

The announcement included several changes to STE’s Board of Directors as well as an update on its balance sheet.

Singapore technology, defence and engineering group Singapore Technologies (ST) Engineering on Tuesday 14 April 2020 issued an update regarding the coronavirus pandemic’s impact on its operations.

A day after the guidance, ST Engineering’s share price fell as much 3.2%. As at 11.45am on Thursday 16 April, STE shares are trading at S$3.42 per share, based on IG trading data.

IG is a world-leading online trading and investments provider for thousands of financial markets. With CFDs, you can buy long or sell short on ST Engineering shares depending on whether you think prices will rise or fall. Start today by opening an account on IG's market-leading trading platform.

ST Engineering to continue a majority of essential operations

On 07 April 2020, the Covid-19 (Temporary Measures) (Control Order) Regulations 2020 were passed in Singapore. Under these regulations, all workplace premises must be closed for the period 07 April 2020 through 04 May 2020 (inclusive), except for entities which provide essential services can continue to operate with minimum staff.

The group stated in this newest announcement that the main company and many of its subsidiaries – including those in aerospace, marine, automotive and electronics – have been classified as a provider of essential services. As such, it will continue to be able to operate from the relevant premises during this period.

In the US, many states have required their residents to observe ‘Shelter in Place’ orders in the past weeks. Nevertheless, the group’s subsidiaries in the US will also continue to operate as essential businesses with the necessary safeguards including safe-distancing measures and telecommuting arrangements.

Read also: ST Engineering's share price soars post-2019 earnings

ST Engineering provides optimistic financial guidance

The group also provided a seemingly positive guidance regarding the coronavirus’ impact on its businesses, stating that its balance sheet is still looking ‘strong’.

It stated that ‘a diverse business portfolio’, covering defence and various domains in the aerospace, electronics, land systems and marine sectors, allows it to mitigate the overall impact on its various entities.

If further added that it is ‘closely monitoring the rapidly evolving nature of the pandemic’, and that it is in ‘constant dialogue with its customers and suppliers to adjust delivery schedules and/or address disruptions in the supply chains’.

Are you bullish or bearish on ST Engineering? Either way, you can buy long or sell short on STE shares and other Singapore stocks using CFDs and other instruments offered on IG's world-leading trading platform. Start today by opening an IG account.

In the meantime, the company said that it has embarked on a group-wide efficiency and cost reduction initiative, while also ramping up investments in improving processes and skills upgrading with an aim to emerge stronger when the pandemic ends.

Finally, the rating agencies of Standard & Poor’s and Moody’s also maintained ST Engineering’s credit rating at AAA/Stable and Aaa/Stable in their recently published credit opinions on 18 March 2020 and 09 April 2020 respectively.

Changes to ST Engineering’s Board of Directors

To provide more financial cushion, the group’s Board of Directors has decided to reduce Board fees by 10%. The President and CEO will also reduce his salary by 10%, while the senior management team will reduce their salaries by percentages ranging between 5% and 10%. These changes will take effect from 01 May 2020.

In a separate announcement posted on the same day, the company revealed that Dr Beh Swan Gin will be retiring as an independent non-executive Director of the company at the upcoming 23rd Annual General Meeting (AGM), and will not be seeking re-election.

ST Engineering had previously announced that the AGM, which was originally scheduled for 23 April 2020, would be deferred to a future date that is still to be determined, due to the Covid-19 situation.

With CFDs, you can buy long or sell short on ST Engineering shares and other Singapore stocks depending on whether you think prices will rise or fall. Start today by opening an account on IG's market-leading trading platform.

What to expect next from ST Engineering’s share price

Just prior to this update, UOB analyst K Ajith had named ST Engineering as his choice stock pick, stating that he sees ‘underlying value’ in the equity.

He cited the fact that one-third of STE's business is defence-related and so will be largely unaffected by the pandemic crisis.

‘After factoring in a 50% reduction in aerospace maintenance revenue for 2Q20 and 3Q20, we only expect a 12% year-on-year decline in net profit for the year,’ he wrote in a note.

He also estimates that the latest wage cost-support measures announced by the Singapore government will lead to S$45 million to S$48 million in cost savings for ST Engineering in 2020. This will equate to roughly 8% of 2019's earnings.

Finally, Ajith sees incremental contract wins in the next six to 12 months as future share price catalysts. On that note, he maintains a ‘buy’ on the ST Engineering stock alongside a 12-month price target of S$4.46 per share.

Are you bullish or bearish on ST Engineering? Either way, you can buy long or sell short on STE shares and other Singapore stocks using CFDs and other instruments offered on IG's world-leading trading platform. Start today by opening an IG account.

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.

React to global volatility

Market volatility continues as coronavirus concerns amplify. Trade with IG and take advantage of:

  • Tight spreads – from just 1 point on major indices, and 2.8 on US crude
  • Guaranteed stops – they’re free to use, and only incur a fee when triggered
  • Round-the-clock assistance – our highly skilled team are available when you need support

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.