Raising STE’s FVE on a Stronger Post-2024 Outlook As Freighter Conversion Expands, 2022 Earnings Likely Flat

We tweak our assumptions for ST Engineering’s, or STE’s, profit outlook, leading to a rise in our post-2024 earnings forecast by an average 9%. Our fair value estimate rises to SGD 4.82 from SGD 4.70. STE is attractive at the current share price level based on our expectation that earnings growth will pick up to average 12.2% through 2026 driven by the acquisition of TransCore, strong freighter conversion demand and a rebound in global travel. For longer-term investors, STE’s shares remain attractive. However, despite robust revenue growth of 16.0%, 2022 net profit is projected to be flat on higher depreciation, interest expense and the absence of government job grants.