Singapore Technologies Engineering share price soars post-FY2019 results
The engineering conglomerate achieved 36% higher net profit in 2019, thanks to contributions from newly-acquired overseas entities.
Share price of Singapore Technologies (ST) Engineering soared 4.25% on Tuesday 25 February, one day after the integrated engineering group posted solid earnings for the fourth quarter (Q4) of its 2019 financial year (FY2019).
The group’s share price is up nearly 11.5% since the start of the year. Shares are currently trading at S$4.40 apiece.
Full-year net profit in line with analyst estimates
The company achieved a revenue of S$2.3 billion in Q4 FY2019, up 29% from S$1.8 billion a year ago. Profit before tax (PBT) was 24% higher at S$198.8 million from S$160.5 million the same period a year before, while net profit grew 36% year-on-year to S$169.5 million from S$124.5million.
For the full year, ST Engineering posted a revenue of S$7.9 billion, a 17% increase from S$6.7 billion a year ago. Profit before tax (PBT) grew 12% year-on-year to S$695.2 million from S$620.7 million, and profit attributable to shareholders (net profit) was up 17% to $577.9 million from 2018’s S$494.2 million.
This was in line with the estimates of six analysts polled by Refinitiv, who had an average Q4 net profit forecast of S$169.522 million, and full-year net profit expectation of S$577.945 million.
Annualised earnings by sector
Across the individual business sectors, net profit for the aerospace sector grew 10% year-on-year to S$268.9 million from S$244.6 million mainly due to US subsidiary MRAS’ contribution and end-of-programme reviews partly offset by assets impairment including rotables, and the absence of prior year’s divestment gain.
Net profit for electronics was S$190.7 million, 2% higher than FY2018’s S$186.5 million, largely due to favourable sales mix partly offset by transaction and integration costs associated with the acquisitions of Newtec and Glowlink.
Land systems’ net profit of S$77.3 million was 46% than a year ago, which is in line with higher revenue and absence of portfolio rationalisation loss incurred in Q4 of FY2018. Finally, the marine sector saw net profit increase by 14% to S$51.5 million from S$45.2 million a year ago despite impact of the arbitration outcome, helped by improved US operations and sale of ROPAX.
Quarterly comparison by sector
In terms of Q4 figures, aerospace recorded revenue of S$941 million, up 45% from S$647 million, resulting in a net profit of S$76.9 million that was 21% higher year-on-year.
Revenue for the electronics sector was 28% over the same quarter in 2018 at S$686 million from S$536 million, and its net profit increased 17% to S$51.6 million from S$44.1 million the year before.
The land systems sector turned in a net profit of S$26.7 million compared to a net loss of $0.7m a year ago. Revenue for the Marine sector was $204m, up 47% y-o-y from $139m, and its Net Profit grew 51% y-o-y to $21.8m from $14.5m.
Company outlook for FY2020
With regards to the earnings, Vincent Chong, President & CEO, ST Engineering, said that the group’s ‘focus in executing its strategy in 2019 produced a good set of financial results’.
He also highlighted three strategic acquisitions that the company made in 2019, namely those of Newtec, Glowlink, and MRAS, which he says will help ‘to strengthen the group’s position for the future’. In addition, the group also ‘recorded a strong order book which provides near-term revenue visibility’.
Finally, the group’s sectoral outlook is as follows:
Aerospace expects to grow nacelle manufacturing and aftermarket business in the US; ramp up component MRO operations and set up airframe MRO capabilities in Vietnam; pursue opportunities to scale up engine leasing business post successful securitisation; and accelerate digital transformation to enhance operations and add value to customers.
For electronics, the company plans to focus on integration of iDirect Europe (formerly known as Newtec) and Glowlink; deliver smart mobility, satellite communications and software system related contracts on schedule; and pursue smart city related contracts in and outside of Singapore.
Land systems plans to pursue and secure key defence and commercial programmes locally and overseas, while the marine sector is developing a research and development plan that will include design performance specifications for the Polar Security Cutter contract in the US.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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