DBS upgraded ST Engineering to Buy from Hold after fourth-quarter profit before tax beat its expectations as margins surprised on the upside.
It raised its target to S$3.90 from S$3.70 after increasing its 2018-2019 earnings per share by 5-7 percent.
The bank said it turned more positive on ST Engineering on a combination of factors, including the stock’s valuations coming off a peak of around 22-23 times forward earnings to trade around 19.5 times earnings.
That’s “a more benign entry level,” DBS said in a note Monday.
“Dividend yield is around 4.4 percent, which should provide support to the stock price,” DBS said.
It also noted that the results of some large contract bids will be announced this year, including tenders for the U.S. Postal Service and the U.S. Marine Corps, which the bank estimated at around US$6.3 billion and US$1.5 billion respectively.
DBS also said the shipbuilding segment appeared to be bottoming, with the delivery of two problematic ConRo vessels, which had higher-than-expected costs, expected in the first quarter.
The stock ended Monday up 1.48 percent at S$3.44.