ST Engineering is Recommended to 'Sell'

ST Engineering (S63.SG) is recommended to Hold, noting its stock has climbed more than 40% year-to-date, outpacing the STI’s around 19%.

“In the uncertain economic environment, investors have been seeking defensive businesses with good dividend yields and STE’s share price has benefited. The growth in air passenger traffic has supported the earnings of MRO providers.”

It notes STE’s orderbook has been growing over the long-term, rising 16% p.a. from end-2005 and end-2010, while FY06-FY11 annual revenues grew 6% p.a.

“The fact that the order book has been growing faster than revenue implies increasing earnings visibility into the future.” It keeps a $3.90 fair value. It's been said it would be buyers of the stock at $3.66. The stock is flat at $3.87.