Investment Thesis
1. Beneficiary of emphasis in defense in the region, Sg govt to continue to spend on defense.
2. Strong independent MRO for airlines, focusing on variety of services and conversions.
3. 4% FCF and dividend yield
Dec 16 sales SGD 6.6bn NP 460m Order book 11bn
PAT contribution
40% Aerospace
35% Electronics
10% Land
15% Marine
75% sales to Asia 25% to US
30-40% Defense related
ROE dropped from 25-30% to 20%
Aerospace
MRO growth 4% CAGR and market size to reach US$100bn by 2025
2000 freighters needed for next 20 years, 1330 will be conversions
It recently acquired an additional 20% stake in Elbe Flugzeugwerke GmbH (EFW) to take its
total stake to 55%. EFW is a German firm which supplies composite flat panels to Airbus
and MRO services in Europe.
Electronics
4% sales growth 6% OP growth
50% communications and sensors, 25% large scale systems, 25% software
Growth from cybersecurity and Smart Nation Solutions
Communications and sensors growing, leading supplier of Very Small Aperture Terminal (VSAT) with 32% market share and Satellite Network Solutions (SNS) bot iDirect in 2005 which helped.
Built first satellite in 2016
Land
Called ST Kinetics
EBIT dropped to 2-3% from 6-7%
Impaired S$61m for Jiangsu Huran Kinetics - worst is over
Large SG govt contract
Sg govt defense budget 12bn
Terrex
STE - started as defense contractor but has leveraged its technical knowhow over the years to penetrate the commercial market. Global presence in 23 countries and 41 cities, and hires more
than 22,000 employees.
Defense sector over time down from 57% of revenues in 2002 to the 36%, with another 33% from government agencies and the balance from commercial businesses. M&A accounted for 40% of growth in last decade.
FCF 350-450m possible, NP flat for 10 years around 500m
1. Beneficiary of emphasis in defense in the region, Sg govt to continue to spend on defense.
2. Strong independent MRO for airlines, focusing on variety of services and conversions.
3. 4% FCF and dividend yield
Dec 16 sales SGD 6.6bn NP 460m Order book 11bn
PAT contribution
40% Aerospace
35% Electronics
10% Land
15% Marine
75% sales to Asia 25% to US
30-40% Defense related
ROE dropped from 25-30% to 20%
PL summary
Aerospace
MRO growth 4% CAGR and market size to reach US$100bn by 2025
2000 freighters needed for next 20 years, 1330 will be conversions
It recently acquired an additional 20% stake in Elbe Flugzeugwerke GmbH (EFW) to take its
total stake to 55%. EFW is a German firm which supplies composite flat panels to Airbus
and MRO services in Europe.
Electronics
4% sales growth 6% OP growth
50% communications and sensors, 25% large scale systems, 25% software
Growth from cybersecurity and Smart Nation Solutions
Communications and sensors growing, leading supplier of Very Small Aperture Terminal (VSAT) with 32% market share and Satellite Network Solutions (SNS) bot iDirect in 2005 which helped.
Built first satellite in 2016
Land
Called ST Kinetics
EBIT dropped to 2-3% from 6-7%
Impaired S$61m for Jiangsu Huran Kinetics - worst is over
Large SG govt contract
Sg govt defense budget 12bn
Terrex
Largest MRO by man hours
STE - started as defense contractor but has leveraged its technical knowhow over the years to penetrate the commercial market. Global presence in 23 countries and 41 cities, and hires more
than 22,000 employees.
Defense sector over time down from 57% of revenues in 2002 to the 36%, with another 33% from government agencies and the balance from commercial businesses. M&A accounted for 40% of growth in last decade.
FCF 350-450m possible, NP flat for 10 years around 500m
