ST Engineering: Buy (Deutsche Bank, 10 June)
STE has seen strong order inflows from its military business and we expect this strength to continue. Sensitive in nature, military orders by the Singapore Armed Forces are often not disclosed but the difference between FY08 and 1Q09 order books (considering 1Q09 recognized total) suggests new orders worth about S$1.2bn were won in 1Q09, the bulk of which we think are liekly military related. STE manufactures products that are well regarded as indicated by the successful UK Bronco sales, continued orders for its 40mm ammunition, and the group previously being the front-runner for potential Indian howitzer order (now put on hold pending an investigation of a retired ordnance official by the Indian authorities). According to STE, its participation followed India's processes. Effective on or after 15 April 2009, for operators of aircraft converted by non-Boeing licensed converters, a fee of US$150-250k/year/plane will be charged by Boeing. ST Aerospace, being a Boeing licensed partner, will fall under a special category with lower fees paid by operators. This move is positive in our view as it effectively raises the price of work done by non-licensed players and may lead to future potential business flowing to licensed parties such as ST Aero. STE is sitting on a record order book of about S$11bn (as at 1Q09), providing healthy long-term visibility. The group is in a net cash position which places it strongly for any potential M&A activities. Our DDM-based target price of S$3.00 is based on a 7.4% cost of equity, (2.6% RFR and 4.8% ERP). Downside risks relate to project execution, greater-than-expected US$ depreciation, and worse-thanexpected aircraft grounding. Maintain Buy on what we see as attractive valuation.

advanced C4I and network capabilities. The project will be

completed by 2012.

We have to add in  the opportunity cost.

 

No doubt this is a good company, if you want to long it for few years, Reward is probable.

Look at the poor outlook of Aviation Industries. I guess patient is needed.

I myself also like this company, i wish to buy some to keep when the price and feeling is right.

Wish you good luck, Trust yourself and your judgement.