MENU

3 Things Investors Should Know From Singapore Technologies Ltd’s Latest 2016 Full Year Results

Singapore Technologies Engineering Ltd (SGX: S63) is an engineering conglomerate with four main business segments, namely, Aerospace, Electronics, Land Systems, and Marine.

The company, which is also known as ST Engineering, recently reported its 2016 full year earnings. Let’s look at three useful pieces of information from the results announcement:

1. The overall result

The following table shows some important items from ST Engineering’s income statement for 2016 and 2015:
ST Engineering 2016 earnings presentationSource: ST Engineering 2016 earnings presentation

We can see that ST Engineering’s net profit is down by 8% despite seeing a 6% increase in revenue.

The lower net profit is largely due to a one-off charge in the third quarter of 2016 for the Land Systems segment’s Specialty Vehicle business in China. If the one-off charge is excluded, ST Engineering’s net profit for 2016 would have been comparable to that in 2015.

2. The positives

There are some positives to take away from ST Engineering’s latest results.

Firstly, both the Aerospace and Electronics segments delivered commendable performances in 2016. The former grew its revenue and net profit attributable to shareholders by 18.8% and 3.4%, respectively. The latter saw its revenue climb by 10.3% and profit attributable to shareholders increase by 7.1%.

Secondly, ST Engineering achieved higher operating cash flow in 2016 (S$758.8 million versus S$465.5 million). The higher cash flows gave the company the latitude to sustain its 2016 dividend at S$0.15 per share, the level seen in 2015.

Lastly, the company expects to clock higher profit in 2017 compared to 2016, while bringing in “comparable” revenue.

3. The negatives

There are also two negative points from ST Engineering’s 2016 results that investors may want to pay attention to.

Firstly, both the Marine and Land Systems segments reported lower profit in 2016. The Marine segment, which saw a 21% decline in profit attributable to shareholders, experienced lower ship building activities. Meanwhile, Land Systems’ profit attributable to shareholders plunged by 77% due to the impairment and provision of closure cost for the aforementioned Specialty Vehicle business in China.

Secondly, the company expects its Marine segment to have another challenging year in 2017, with its profit before tax declining compared to 2016.

In sum, ST Engineering ended 2016 with a good set of results despite the headline number showing a profit decline. That being said, there are difficulties in some of its businesses and investors may want to look out for signs of improvement in those areas.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and 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 Lawrence Nga doesn’t own shares in any companies mentioned.