Singapore Technologies Engineering Ltd (SGX: S63) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations. There may be useful information that investors can learn from the webcasts and transcripts. In late February, Singapore Technologies Engineering, or ST Engineering for short, had released its earnings for 2015. I had spent time watching the webcast for the earnings release and came away with seven things which may be worth noting for investors. But before I share them, here’s a quick background on ST Engineering for context. The engineering firm has its fingers in many pies,…
There may be useful information that investors can learn from the webcasts and transcripts. In late February, Singapore Technologies Engineering, or ST Engineering for short, had released its earnings for 2015. I had spent time watching the webcast for the earnings release and came away with seven things which may be worth noting for investors.
But before I share them, here’s a quick background on ST Engineering for context. The engineering firm 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 company into a variety of sectors including defence, information communication technologies (ICT), and global maintenance, repair and operation (MRO).
With that, here are my notes:
- Eleana Tan, ST Engineering’s chief financial officer, kicked off the meeting with an overview of the year’s results. Among other things, she said that ST Engineering has cash and cash equivalents, including funds under management, of $1.4 billion. For perspective, this is a decline from the selfsame figure of $1.7 billion recorded last year. Part of the reason is due to around $100 million in share buybacks spent in 2015.
- If ST Engineering’s revenue is broken down by location of its customers, Asia comes out tops with 62% of total revenue. US took up second place with 24% while Europe and Others clocked in 5% and 9% respectively.
- Tan felt that there was beauty in the diversity of ST Engineering’s business. This is reflected in the unchanged profit before tax (PBT) margin of 10% compared to 2014. The Electronics segment recorded a lower PBT margin but this was offset by a stronger margin at the Land Systems sector for the year.
- In a previous article, I mentioned that ST Engineering’s operating cash flow fell from $624 million in 2014 to $465 million in 2015. Tan said that it was due to lower customer advances received during the year and that the nature of ST Engineering’s business can be lumpy.
- A basic outlook for 2016 was also provided. Overall, ST Engineering expects revenue to be higher but PBT to be comparable to 2015. The management team expects revenue growth from Aerospace, Electronics, and Marine. Meanwhile, the conglomerate also expects lower PBT in Marine and Land Systems in 2016.
- Tan also went through the key achievements of each sector for the year. Interestingly, ST Engineering had signed a memorandum of understanding for the development of autonomous vehicles. This Fool wonders if ST Engineering’s autonomous vehicle would become a reality within the next five to ten years.
- To round off the presentation, Tan also said that ST Engineering will be paying out a total dividend of $0.15 per share in 2015. This represents 88% of ST Engineering’s net profit. But, I’d like to point out that the firm’s free cash flow had reduced to $192 million in 2015, over 50% lower than the $400 million generated in 2014. This may be worth keeping an eye on as ST Engineering is set to pay out just under $470 million for 2015’s dividends.
If you'd like to receive more investing insights and be kept updated on the latest company and stock market news, you can sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore.
Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.
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.