Singapore Technologies Engineering Ltd’s Latest Earnings: What Investors Should Know

Singapore Technologies Engineering Limited (SGX: S63) reported in its third quarter earnings report this morning. The reporting period was for 1 July 2015 to 30 September 2015.

The engineering firm, known as ST Engineering for short, has its fingers in many pies, thus making it a conglomerate. Its major business segments include Aerospace, Electronics, Land Systems, and Marine. This puts the conglomerate into a variety of sectors including defense, information communication technologies (ICT), and global maintenance, repair and operation (MRO).

You can read more about ST Engineering here and its subsidiaries here and here . Or catch up with the previous quarter’s earnings here .

Financial highlights

The following’s a quick rundown on ST Engineering’s latest financial figures:

  1. Overall revenue for the second quarter was $1.5 billion, a 3% drop compared to the same quarter last year.
  2. Quarterly profit attributable to shareholder came in at $133.3 million, up 10% year on year.  
  3. Consequently, earnings per share (EPS) was also up 10% year on year from 3.89 cents in the third quarter of 2014 to 4.29 cents in the reporting quarter.
  4. Cash flow from operations came in at $117.4 million for the reporting quarter and capital expenditure clocked in at $59.6 million. This gave the conglomerate positive free cash flow of $57.8 million.  
  5. As of 30 September 2015, ST Engineering had $920 million in cash and equivalents and borrowings of about $1.14 billion. This was a decline a year ago, where it had $1.42 billion in cash and equivalents and borrowings of $1 billion.

ST Engineering experienced another sluggish quarter for its topline. Its balance sheet weakened slightly compared to a year ago as well. That said, lower financing cost helped move ST Engineering’s net profit upwards. Furthermore, the conglomerate moved back into positive free cash flow territory after recording negative free cash flow in the previous quarter.  

Operational Highlights

For the third quarter, ST Engineering’s Aerospace business segment added a healthy 8% increase in its topline to end the quarter with $506 million. The increase in sales stands in contrast with rival SIA Engineering Company Limited’s (SGX: S59) 6.7% topline decline over the same timeframe.  

Elsewhere, its Electronics business segment had a strong showing, with sales increasing 21% year on year. The Electronics business segment ended the quarter with $429 million.

On the other hand, revenue for the Land Systems business segment and the Marine business segment both suffered during the reporting quarter. The former recorded an 11% year on year decrease while the latter was worst off, clocking in a 39% decline in topline. The Marine business segment ended the quarter with just $205 million, while the Land Systems business segment brought in $319 million.

The conglomerate ended the third quarter with an orderbook of $12.2 billion, of which $1.4 billion of orders is expected to be delivered in the remaining months of 2015.

Tan Pheng Hock, ST Engineering’s Chief Executive Officer, rounded off the quarter with the following comments:

“For the third quarter as well as the first nine months of 2015, the Group reported year-on-year comparable Revenue and PBT [profit before taxes].

The Group continues to face challenges with our Aerospace sector’s Maintenance, Repair and Overhaul business experiencing prolonged softness in activities. Shipbuilding performance remains weak both locally and in the US, but the diversity of our businesses and appreciation of the USD [US dollar] helped to cushion impact on the Group’s performance.

Barring unforeseen circumstances, the Group expects FY2015 revenue to be comparable, while PBT is expected to be lower than that of FY2014.””

Foolish take away

At its opening price today of $3.30, ST Engineering traded at around 19.4 times trailing earnings with a projected dividend yield of 4.8%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.