Compiled by Leila Lai
SEPT 18 CLOSE: $3.96
TARGET PRICE: $4.34
UOB Kay Hian Research, Sept 18
Six months after acquiring Newtec for $383 million, ST Engineering (STE) has made yet another satellite communications (satcom) acquisition - Glowlink Communications Technology (Glowlink) - via its US subsidiary I-Direct.
Newtec is currently focused on supporting IP-based satellite broadcast for real-time content distribution, and Glowlink's anti-jamming capabilities will likely be integrated to advance Newtec's product offering to customers such as Space X, One Web, Telesat, LeoSat etc. In addition, STE will be able to offer satellite connectivity options for defence, utility and smart cities, with enhanced security features.
STE had earlier guided that integration costs would result in no more than a $10 million earnings decline from 2018's $26 million in Ebitda (earnings before interest, tax, depreciation and amortisation), while 2020's earnings are expected to rise by more than $10 million year-on-year in 2020. With the acquisition, there is a possibility that Newtec's earnings growth could be stronger.
We have not raised our 2020 earnings assumption as yet, but have factored in the acquisition cost for 2019. We do not expect the acquisition to impact dividend payout of $0.155 (2018: $0.15).
Upgrade to "buy". STE's stock price has declined by 10 per cent post Q2 2019's results. We had then downgraded the stock and suggested an entry near $4.00.
At current share price of $3.90, we believe downside risk is low.
STE has a triple -A credit rating from S&P and Moody's and offers a dividend yield of 4.0 per cent at current levels. Our target price is slightly lowered from $4.36 to $4.34, after factoring in the acquisition cost.
| BUY (MAINTAINED)
SEPT 18 CLOSE: $2.40
TARGET PRICE: $2.50
Maybank Kim Eng Research, Sept 17
Mapletree Industrial Trust (MINT) has gained high-tech growth momentum with its second overseas deal. Its US$1.4 billion (S$1.9 billion) investment in 13 data centre assets in North America lifts freehold properties from 24 per cent to 37.9 per cent of its assets under management (AUM), and increases distribution per unit (DPU) visibility.
We estimate DPUs could rise 3.0 per cent in FY21, as its high-tech AUM contribution grows from 43.5 per cent to 52.9 per cent. Maintain "buy" and we raise our dividend discount model-based target price to $2.50. We favour MINT for its growth fundamentals, as DPUs are supported by recovering leasing demand in Singapore and a more resilient portfolio given its high-tech asset investments and overseas diversification.
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