Compiled by Navin Sregantan
ST ENGINEERING | BUY (MAINTAINED)
MAY 22 CLOSE: $3.92
TARGET PRICE: $4.45
RHB Research Institute, May 22
Amid strong order wins by its aerospace and electronics businesses during Q1, ST Engineering reported an outstanding order book of $14.1 billion as at end-March 2019, a record high.
It also offers two years of revenue visibility.
ST Engineering expects to recognise $4.2 billion of its order book as revenue over the next three quarters.
This provides scope for organic revenue growth and accounts for 76 per cent of our estimated revenue for the rest of 2019.
ST Engineering expects the Middle River Aerostructure Systems (MRAS) acquisition, completed in April, to be earnings-accretive from the second half of the year.
Management also remains confident of completing the Newtec acquisition by then.
Although ST Engineering's growth remains exposed to global economic cycles, its business and geographic diversity as well as the long-term nature of its contracts ensures that its revenue remains relatively shielded from short-term uncertainties created by the escalation in trade tensions between the US and China.
Key downside risks are weakness in aviation maintenance, repair and overhaul demand and delays in Smart Nation initiatives amidst decelerating global economic growth.
Lower-than-estimated contributions from MRAS and Newtec acquisitions could also derail earnings growth.
DBS GROUP HOLDINGS | BUY (MAINTAINED)
MAY 22 CLOSE: $25.43
TARGET PRICE: $29.46
Maybank Kim Eng, May 21
North Asia delivers a third of DBS Group Holdings' income. Intensifying US-China trade tensions have created operating and news-flow risks.
Nevertheless, DBS has been delivering North Asian return on assets that are significantly above its long-term mean since the trade war began in the first quarter of 2018.
Asset quality is also much better than at home.
In North Asia, DBS is mostly exposed to high-quality corporates and financial institutions, funded by a large, low-cost for current and savings account base.
This puts it in a stronger position to deal with trade-war volatility than regional peers, we believe.
Importantly, its Singapore earnings should be more than sufficient to back guided dividend payments.
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.
The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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