ST Engineering’s Orderbook Stays Strong, Rising Debt Risk Reflected

We maintain our fair value estimate on ST Engineering, or STE, at SGD 4.74 per share following its third-quarter update that showed revenue for the nine months to end-September reached SGD 6.5 billion, making up 72% of our full-year 2022 estimate. The orderbook remains strong and is now SGD 25.0 billion, moving up from SGD 18.2 billion at end 2021. With the firm indicating that it should realize SGD 2.5 billion of this orderbook in fourth-quarter 2022, we’re confident that it should meet our expectations. We continue to like the firm at the current price level and see its recent sale of its U.S. marine operations as a step to improve its capital allocation, while a material contract win by recently acquired U.S. tolling operations subsidiary TransCore reinforces STE’s narrow moat rating.