This engineering company’s new contracts in 4Q were a record high
By: Gwyneth Yeo
SINGAPORE (Jan 19): ST Engineering’s aerospace and electronics business segments had jointly reported a record high in new contracts for 4Q16 of $1.54 billion. This came on top of the $138 million in new contracts from the marine segment.
Aerospace reported new orders of $840 million in 4Q16 alone, bringing its total new contracts for the year to $2.57 billion, and a 26% increase from 2015.
Among them is a five-year contract with Alaska Airlines to provide maintenance repair and overhaul (MRO) services for its CFM56-7B engines, which are used in their Boeing 737-700 and 737-900 aircraft.
Other contracts include line and heavy airframe maintenance for commercial and military operators.
For the electronics arm, new contracts of $695 million were a record high for the company, and brought the unit’s full year contract win to $2.33 billion, a 45% increase over 2015.
The new contracts comprise $529 million from the advanced electronics and information communications technologies sector, $71 million from the rail electronics and intelligent transportation sector and $95 million to supply broadband network, satellite network equipment and earth stations.
In the marine segment, the $138 million in new contracts included a project awarded by the Ministry of Home Affairs to design, construct, and maintain a heavy marine fire vessel, a heavy marine rescue vessel and a marine rescue vessel. There were also new contracts for large ship repairs.
Credit Suisse’s analysts Gerald Wong and Hwang Shih Haur noted that the marine segment had seen very low contract wins since 2015 and the current new orders indicates “signs of improvement”.
Song and Hwang expect ST Engineering’s earnings to improve, driven by the new order intake, and maintains an “outperform” rating on the group. “We expect earnings recovery in 2017 to drive consensus upgrades and re-rating,” said the pair in a note on Wednesday, adding that the group continues to offer a dividend yield of 4.7% for FY17.
Shares in ST Engineering closed 2 cents lower at $3.39 on Thursday.

