ST Eng’s marine arm saw revenues drop by 68% in 4Q11

Blame it on the terminated Ropax ferry contract, says DBS.

All segments of ST Engineering recorded revenue growth in 4Q11 except marine which drop to SGD91 million from SGD286 million in 4Q10.

ST Engineering on March announced that its marine arm – ST Marine (STM) – has received a notice of termination from Louis Dreyfus Armateurs (LDA) regarding the shipbuilding contract for the Roll-on/Roll-off Passenger ferry (Ropax). LDA is alleging that there is a delay in the delivery of the S$179m vessel, as well as a deficiency in the deadweight capacity.

On a positive note, DBS analyst Suvro Sarkar said that STE reported better-than-expected results in 4Q11, driven by higher revenues and better margins in a stronger US$ environment.

4Q11 net profit was up 6% y-o-y to S$152m, driving FY11 net profit up 7% y-o-y to S$528m.

PBT was driven by better sales mix at Land Systems and Marine sectors. Aerospace PBT margin was strong at 14% in 4Q11. Group PBT was up 4% in FY11 but lower effective tax rate contributed to the higher net profit growth.

The Group ended the year with a record S$12.3bn orderbook, which according to DBS ensures steady revenue growth and earnings delivery, going forward.

Management outlined its growth strategy through acquisitions (e.g. Nera Tel), new facilities like the Xiamen engine center and the upcoming MRO facility at Guangzhou, new capabilities like VIP aircraft interior modification, and expansion of existing facilities like building more capacity at Seletar Aerospace Park in Singapore and adding a shiprepair business at VT Halter Marine’s yards in the US.

However, other than any big acquisitions, DBS believes that other growth plans are more medium term in nature.