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

Singapore Technologies Engineering Ltd (SGX: S63) released its second-quarter earnings report last Friday. The reporting period was for 1 April 2016 to 30 June 2016.

For a quick background, 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. These segments are involved with a variety of sectors including defense, information communication technologies (ICT), and global maintenance, repair and overhaul (MRO).

You can read more about ST Engineering in here and its subsidiaries in here and here. You can also catch up with the results from the company’s previous quarter here.

Financial highlights

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

  1. For the reporting quarter, ST Engineering’s revenue was $1.6 billion, a 5% increase compared to the same quarter a year ago.
  2. Profit attributable to shareholders reached $127.3 million, up 2% year-on-year.
  3. Consequently, earnings per share (EPS) was also up 2%, going from 4.01 cents in the second-quarter of 2015 to 4.10 cents in the reporting quarter.
  4. ST Engineering’s cash flow from operations came in at $183.4 million while capital expenditure was $32.9 million. This gave the conglomerate free cash flow of $150.5 million for the reporting quarter. This was a good improvement from a year ago, when ST Engineering had negative free cash flow.
  5. As of 30 June 2016, ST Engineering had $801 million in cash and equivalents and borrowings of $1.0 billion. This is a slight improvement from the end of last year, when ST Engineering had $951 million in cash and equivalents and borrowings of about $1.2 billion.

In all, ST Engineering reported growth for its top-line and an increase in profit. The company also recorded good free cash flow and saw its balance sheet improve.

The board of directors declared an interim dividend of five cents per share, unchanged from a year ago.

Operational highlights

During the second-quarter of 2016, ST Engineering’s Aerospace segment posted a 20% increase in revenue to $619 million. The Electronics business segment also had a solid showing, with sales increasing 8% year-on-year to $445 million.

The Marine and Land Systems business segments continued to be weak in comparison. The former had a 2% decline in revenue to $248 million. The latter’s revenue was $283 million for the reporting-quarter, down 11% from a year ago.

ST Engineering ended the quarter with an order book of $11.6 billion, up slightly from the $11.5 billion seen in the previous sequential quarter, but down from $12.4 billion a year ago.

Tan Pheng Hock, ST Engineering’s president and chief executive, shared a brief outlook for the current year in the earnings release:

“Barring unforeseen circumstances, the Group expects FY2016 Revenue to be higher, but PBT to be lower compared to FY2015. The global economic outlook remains challenging with industry headwinds facing the marine business, the slow-down in the China economy, and negative business sentiment that is prevalent in Europe and other parts of the world.”

At its closing share price of $3.41 last Friday, ST Engineering traded at around 21 times trailing earnings with a trailing dividend yield of 4.3%.

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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.