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3 Things Investors Should Know About Singapore Technologies Engineering Ltd’s 2017 Earnings

Singapore Technologies Engineering Ltd (SGX: S63) is a global technology, defence and engineering conglomerate specialising in the aerospace, electronics, land systems and marine industries.

Last week, the company announced its financial results for the full year ended 31 December 2017. Let’s look at three main aspects of the announcement here.

Show me the money

Full-year revenue slipped 1% year-on-year, from S$6.68 billion in 2016 to S$6.62 billion in 2017. The decline in the top-line was mostly due to lower revenue contributions from the land systems and marine business divisions, partially offset by higher contributions from aerospace and electronics.

The following shows the group revenue by business divisions:Source: Singapore Technologies Engineering’s 2017 earnings presentation

Net profit for 2017 rose 5.6% to S$511.9 million, mainly due to higher operating profit and a positive impact from the US tax reform. The breakdown of the net profit is shown below:Source: Singapore Technologies Engineering’s 2017 earnings presentation

As a result of higher net profit, earnings per share grew from 15.60 cents in 2016 to 16.43 cents in 2017. The net profit margin for 2017 improved to 7.7%, from 7.2% in 2016.

ST Engineering’s balance sheet strengthened for the year. As at 31 December 2017, it had S$999.0 million in bank balances and other liquid funds, and total debt of S$1.12 billion. This translates to a net debt position of S$117.1 million. In comparison, at the end of 2016, it had S$175.4 million in net debt.

Return on equity went up slightly from 22.2% in 2016 to 22.9% in 2017.

Cash flow from operations for the year inched up by 0.6% to S$763.7 million. With a capital expenditure of around S$444 million in 2017, free cash flow came in at S$319.7 million. This is an improvement from 2016’s free cash flow of S$291.6 million.


The board proposed a final dividend of 10.0 cents per share. Together with the interim dividend of 5.0 cents already paid out, the total dividend for 2017 would be 15.0 cents per share, unchanged from 2016. The 2017 dividend represents a payout ratio of 91.3%.

What the future holds?

ST Engineering ended 2017 with an order book of S$13.2 billion, around 14% higher than that of 2016. In 2018, about S$3.8 billion of the orders is expected to be delivered.

As for its outlook, Vincent Chong, president and chief executive of the defence and engineering giant, said:

“We will continue to strengthen our core businesses, drawing upon the strengths of each sector to offer innovative technologies in the areas of defence and smart city solutions (including, among others, cybersecurity, public security services, urban transportation and robotics) to our customers around the world. We expect that our performance will strengthen over the next few years. Growth will come from the Aerospace sector as its A330 and A320 passenger-to-freighter conversion programmes gain momentum, and from the more expansive smart city offerings emanating from the Electronics and Land Systems sectors in Singapore and overseas. Industry conditions for the Marine sector are likely to remain weak in 2018, but we will continue to focus on strengthening our operational efficiency.”

ST Engineering shares closed at S$3.44 yesterday. This translates to a trailing price-to-earnings ratio of close to 21 and a trailing dividend yield of 4.4%.

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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 Sudhan P doesn’t own shares in any companies mentioned.