ST Engineering falls 6.4% despite higher first-half profit; stock had surged over 80% so far this year

Shares of ST Engineering tumbled shortly after trading started on Thursday (Aug 14) despite the group announcing better first-half results pre-market opening.

The counter dropped 6.4 per cent to S$8.39 as at 9.58 am on Thursday, with five million shares having changed hands. It closed at an all-time high the previous day at S$8.96. Investors may be taking profit after the counter’s impressive run-up in previous months.

Year to date, the stock had risen over 80 per cent. It hit S$8.94 on Jul 24,shortly after the company announced S$4.7 billion worth of order wins.

The company posted a 19.7 per cent increase in net profit to S$402.8 million for the first half-year ended June, up from S$336.5 million in the year-ago period. This was largely due to revenue growth from its commercial aerospace as well as its defence and public security business segments, despite drag from US tariffs and foreign currency exchange.

Citi Research analyst Luis Hilado said in a Julynote that the 12-month price target for ST Engineering was S$8.40. Shares of ST Engineering were trading at S$8.27 at the time.

“We see ST Engineering’s top-line momentum driving operational leverage and margin improvement across its core businesses. We recognise the existence of near-term risks (labour shortages, cost inflation, integration risks) but take positively that a healthy base of contracts to win can provide the economies of scale to offset such,” Hilado wrote.

“We believe the steady and predictable growth in the current uncertain market conditions will drive it above its mean valuation,” he added.

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