ST Engineering's orderbook hits all-time high at $15.9b

Small divestments continue to optimise its business portfolio.

From its reported order wins of $5.4b in 9M19, STE has since additionally amassed an all time high orderbook of $15.9b. This orderbook provides STE revenue visibility of two and a half years, according to a report by RHB Bank.

Small divestments continue to optimise its business portfolio. STE divested small stakes in two entities in November 2019. One of the company’s disposals was its pilot training business in Australia for $9.3m, at a gain of $1m, and has also sold all of its 49% stake in Takata CPI Singapore for $5.3m, at a gain of $1m.

The company’s acquisitions, on the other hand, are sighted to drive near-term earnings. STE has reported strong profit growth in the last two quarters, aided by contributions from Middle River Aerostructure Systems (MRAS), a US-based OEM engine nacelle manufacturer that has been acquired early this year. RHB expects profit contribution to increase, in line with the ramp-up in output at MRAS. The recently-completed Newtec and Glowlink acquisitions should remain earnings-accretive, despite $20m in integration costs.

Also read: ST Engineering bags 15-year maintenance service contract for Japan Transocean Air

Meanwhile, RHB sights few downside risks that could spur failure to sustain the current rate of strong order wins, such as increase in MRAS & Newtec integration costs, and lower-than estimated contributions from recently-completed acquisitions.