Smart Nation projects are expected to ensure its profitability.
ST Engineering is on track to meet and even beat profit targets for the coming months with a bloated orderbook worth $13.4b in Q2 which is near the historial peak level, according to DBS Research.
Despite losing out in the final bidding round to build the US Marine Corps’ Marine Amphibious Combat Vehicle to BAE systems, STE was able to score orders worth $1.27b from the Aerospace and Electronics segment which boosted QoQ growth.
“The orderbook provides robust revenue visibility into FY18/19, with a roughly 1.9x book-to-bill Ratio,” said analyst Suvro Sarkar.
In fact, business opportunities related to Singapore’s Smart Nation push could provide STE with projects worth more than $1b in the near future as the government steps up efforts to incorporate technologies across healthcare, housing and transport.
STE is aiming to more than double its annual smart city revenues by 2022 from 2017 levels of about c.$1b.
ST Aerospace is poised to be another growth engine amidst a partnership with Airbus for passenger-to-freighter conversion of its A320/A321 and A330 jets; expansion of component manufacturing business in Europe, a continued expansion of its cabin interior service solutions business, particularly for VIP aircraft completions; and expansion of its mid-life aircraft leasing and engine leasing business.
“ST Aerospace’s engine shops are experiencing high utilisation rates, with an uptick in shop visits having been felt since last year, which has continued into 2018,” added Sakar.
Despite its overseas exposure, STE is in a position to wave off trade war concerns at this point, Sakar added, as they can absorb rising input prices due to price provisions in their contracts that allow for a re-negotiation of rates.
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