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A Close Look At Singapore Technologies Engineering Ltd’s Growth, Dividend, And Valuation

Over the last five years, the share price of Singapore Technologies Engineering Ltd (SGX: S63) has climbed by merely 12%. That does not seem like much, but when compared to the Straits Times Index’s (SGX: ^STI) gain of just 2% in the same time frame, the engineering conglomerate’s double-digit return looks much better.

Here are three important aspects about ST Engineering’s business fundamentals that may interest investors, namely, its growth, dividend, and valuation.

Growth

The following table shows changes in ST Engineering’s revenue and earnings per share from 2011 to 2015:

st-engineerings-revenue-and-earnings-per-share-table
Source: S&P Global Market Intelligence

One thing stands out here: The company’s revenue and earnings per share have both been stable for the period under study.

Dividend

Right now, ST Engineering has a share price of S$3.29. With a trailing dividend of S$0.15 per share, the company has a dividend yield of 4.5%. For perspective on this yield, the SPDR STI ETF (SGX: ES3) – an exchange-traded fund that tracks the fundamentals of the Straits Times Index – has a yield of 3.2%.

Next, we can also try to assess the sustainability of the company’s dividend. Bear in mind that there are many things to look at, but in here, we’d focus on just two financial ratios: the debt-to-shareholders’ equity ratio and the pay-out ratio. The former estimates the level of financial risks a company is facing while the latter measures a company’s dividend as a percentage of its profit.

Generally speaking, the lower the ratios are, the better it could be. In the case of ST Engineering, it has trailing earnings of S$0.165 per share, so that puts its pay-out ratio at 91%. With total debt of S$1.04 billion right now (as of 30 June 2016) and shareholders’ equity of S$2.02 billion, the company has a debt-to-shareholders’ equity ratio of 51%.

Valuation

We know ST Engineering’s current share price and trailing earnings per share, so we also know that the company has a trailing price-to-earnings ratio of 20.

There are two things to note about the company’s PE ratio. First, it is near the middle of its historical ranges over the past five years as you can see in the chart below:

st-engineerings-pe-ratio-since-14-september-2011
Source: S&P Global Market Intelligence

Second, it is higher than the SPDR STI ETF’s PE ratio of 12.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.