ST Engineering's Purchase of Shipyard for SGD 95 Million Is Within Planned Capital Expenditures

Our fair value estimate and earnings estimates for ST Engineering, or STE, are unchanged with its acquisition of Keppel Corp's Gul Road shipyard within its budgeted capital expenditures. The SGD 95 million cost is for an existing, operational facility, saving time and effort for a newbuild. We assume STE's 2023 capital expenditures will be SGD 352 million, which is slightly higher than management guidance for around SGD 300 million. We continue to like STE at the current share price level and expect earnings growth to pick up from 2024 as the acquisition of Transcore is digested. We expect underlying aerospace activities to post a decent five-year 15.9% top-line compounded annual growth rate to 2026.