Is ST Engineering heading for a turnaround in Q2?

Electronics, marine segments are key.

ST Engineering (STE) is poised to see a marginal QoQ improvement in Q2, as analysts believe that the firm’s Q2 yields will see a boost thanks to electronics and marine segments.

According to a report by CIMB, the uplift can be chalked up to stronger electronics and the lack of provision from marine’s Crowley’s Con-Ro’s 1Q16 project.

Further, EFW’s consolidation and strong MRO work in China should sustain gross profit. CIMB notes, though, that gross profit could be slightly compromised to about 11.8-12% on the higher cost base in EFW and pricing competition in China.

In addition, land systems could post stronger QoQ earnings with the exit of GKJ from China in June.

Meanwhile, solid order momentum from aerospace and electronics could keep STE’s order book steady at $11.5b by end-2016. Unlike its peers, STE is a candidate for defensive yield bolstered by net cash as well as high return on equity.