ST Engineering's contract value could grow to $4.2b in 9M 2019

Its orderbook recognition for the next three quarters is expected to rise 31%.

Of the $14.1b worth of contracts Singapore Technologies (ST) Engineering clinched as at end-March, approximately $4.2b is expected to be delivered in 9M 2019, a report by OCBC Investment Research (OIR) revealed.

ST Engineering has so far had a strong 2019 after profits jumped 11% YoY to $131.1m in Q1 from $117.7m in 2018, thanks to a 6% profit boost from the aerospace sector and an earnings recovery from its marine division, its financial statement revealed. Revenue also edged up 5% YoY from $1.65b to $1.73b.

Also read: ST Engineering's Q1 profits grew 11% to $131.1m

The firm has also been positioning itself to capitalise on air traffic growth following its announcement that its aerospace arm and Vietnam Airlines Engineering Company (VAECO), a subsidiary of Vietnam Airlines Co., have incorporated a new joint venture (JV) company, Vietnam Singapore Technologies Engineering Aerospace Co., which will provide component maintenance, repair & overhaul (MRO) solutions. ST Engineering is said to have a 49% stake in the JV.

“Existing maintenance facilities of Vietnam Airlines at Noi Bai International Airport in Hanoi and Tan Son Nhat International Airport in Ho Chi Minh City will be leveraged upon, and new infrastructure will be invested in to carry out component MRO work at these facilities,” OIR analyst Low Pei Han noted, adding that the new component MRO facilities are expected to begin operations in mid-2019.

Meanwhile, ST Engineering is also collaborating on enhanced digital and connectivity solutions. In a separate announcement, the firm revealed that it had entered into a partnership with Nokia on key technology areas, such as 5G and Internet of Things (IoT). The collaboration will allow both companies to cross sell their solutions and expand business offerings.

“ST Engineering will resell Nokia’s internet protocol (IP), optical networking and wireless broadband solutions which include 5G, last-mile and analytics. Nokia will in turn incorporate STE’s Very Small Aperture Terminal (VSAT) and cybersecurity solutions in its global project offerings,” Low explained.

Low further added that other potential catalysts spurring ST Engineering’s bright long-term prospects include the US Postal Service’s tender for next-gen electric trucks, as well as the exercising of options for two polar security cutters by the US Coast Guard.

“We expect further growth in order book over the longer term with better traction in Smart City solutions and export of defence solutions,” Low said. A previous report by UOB Kay Hian echoed this sentiment, highlighting how ST Engineering’s orderbook recognition for the next three quarters is expected to rise 31%.