With this, Hilado has revised his forecasts to assume the transaction takes place with some slight negative impact to recurring profit in FY2025 or FY2026. However, the analyst is “neutral” from FY2027 onwards as LeeBoy’s earnings before interests and taxes (ebit) margins are dilutive to the overall margin of the group’s defence and public security (DPS) business.
He adds that proceeds deployed to reduce the group’s debt will lower interest expenses while other increased DPS order wins will partly cover the revenue gap.
“Our long-term forecast remains aligned with ST Engineering’s FY2029 targets of above $7.5 billion DPS revenues,” writes Hilado.
As at 11.06 am, shares in ST Engineering are five cents lower or 0.63% down at $7.90.
