ST Engineering downgraded by UOB KayHian after weak aerospace earnings

ST Engineering display at CommunicAsia conference in Singapore in 2019.ST Engineering display at CommunicAsia conference in Singapore in 2019.

UOB KayHian downgraded ST Engineering to Hold from Buy Thursday, saying most of the positives appear priced into the stock for the next six months.

The brokerage said second quarter earnings met its expectations, but that it had expected more broad-based growth.

ST Engineering reported on 14 August its second quarter net profit increased 18 percent on-year to S$138.2 million on higher profit from the marine and “others” segments. Revenue for the quarter ended 30 June rose 8 percent on-year to S$1.78 billion, the defense and aerospace company said in a filing to SGX.

“We are slightly disappointed with the weak earnings from the aerospace and the electronics divisions,” the brokerage said in a note Thursday.

“While we believe STE’s earnings are less cyclical than other industrials, we believe the stock is unlikely to outperform over the next two quarters, barring a significant contract win,” the note said. “We have also lowered our earnings estimate for 2020 after tweaking down the electronics sector’s revenue growth.”

The brokerage lowered its target price to S$4.36 from S$4.70. It tipped a suggested entry level of S$4.00.

Shares of ST Engineering ended Monday up 1.73 percent at S$4.11.

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