Saturday, March 2, 2024

Singapore Technologies Engineering FY2023 Earning Result

Singapore Technologies Engineering Limited ("STE") reported their FY2023 earning result on Thursday [here].  Here is a quick dive into the numbers:

Numbers in S$ million unless stated otherwise.
Twelve Months Ending 31 Dec 2023 31 Dec 2022 % Change
Revenue 10,101.02 9,035.10 11.8
Gross Profit 1,972.75 1,698.66 16.1
Net Profit 586.47 535.01 9.6
EPS (in cents) 18.82 17.18 9.6
DPS (in cents) 16.0 16.0 -

FY2023 revenue was S$10.1B (FY22: S$9.0B), up 11.8% y/y, contributed mainly by the Commercial Aerospace unit of S$3.9B (FY22: S$3.0B), up 30.5% y/y and the Urban Solutions & Satcom unit of S$1.9B (FY22: S$1.7B), up 9.7% y/y.  The Defence & Public Security unit saw a slight 0.5% y/y revenue decline to S$4.2B.

FY2023 EBIT was S$914.7M (FY22: S$735.1M), up 24.4% y/y, contributed mainly by the Defence & Public Security unit of S$567.4M (FY22: S$405.0M), up 40.1% y/y.  Urban Solutions & Satcom unit saw a massive 65.7% EBIT decline to S$10.0M (FY22: S$29.2M), attributed to Satcom weakness, including severance costs and SatixFy divestment loss totalling S$32M, partially offset by higher EBIT from TransCore.

Management highlighted its TransCore investment became earnings accretive in FY2023, ahead of plan.  As at 31 Dec 2023, STE's order book remains robust at S$27.4B, inclusive of about S$3.1B new contract win in 4Q2023.  STE expects to deliver about S$7.9B from the order book in 2024.

The Board has proposed a final quarterly dividend of 4 cents per share (4Q2022: 4 cents), Ex Date: 30 Apr 2024.  This brings FY2023 total dividend to 16 cents per share, no change from previous year.

My Thoughts
Of all the local conglomerates I have researched, STE is one of the more capital-efficient entities.  STE's ROE is about 23.8%, comparable to post-restructured SembCorp Industries (23.8%), but far better than Keppel (8.1%, pre-restructured) and Haw Par (6.2%).  However, as with typical industrials, STE has a lot of debt on its books (S$6.1B).  Nonetheless, STE's healthy order book gives visibility to its revenue in the coming years.  Barring any extraordinary downturn in the global economy, STE should continue to remain profitable over the long term.

While its 16 cents DPS (85% payout of earnings) is nothing to shout about, I like the consistency of receiving cash quarterly without the unncessary shareholder capital change (spinoff, bonus stock issue etc).

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