LeeBoy, previously under ST Engineering’s defence and public security (DPS) segment, had a FY2024 revenue of $326.3 million, earrings before interests and taxes (ebit) of $37.2 million, a profit before tax (PBT) of $33.8 million and a book value of $200.9 million.
Jaiswal writes: “ The transaction, part of ST Engineering’s ongoing portfolio rationalisation and marking its exit from the construction equipment business, is expected to close in 4QFY2025.”
The deal will deliver an after-tax gain of $100 million and raise FY2024 profit by 10.5% on a pro-forma basis.
“We maintain our FY2025 recurring profit estimate as the gains would be one-off. We trim FY2026- FY2027 earnings by 2% per annum (p.a.), reflecting the loss of earnings from LeeBoy, partially offset by the reduction in interest expenses,” writes Jaiswal.
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Meanwhile, the group’s record orderbook of $29.8 billion offers around 2.6 years of forward revenue coverage, notes the analyst.
Importantly, the current orderbook excludes the US$1.73 billion New Jersey E-ZPass services contract, which has yet to be added, pending the resolution of a competitor’s appeal.
With this, Jaiswal’s FY2029 forecasts are more conservative than ST Engineering’s guidance of an 8.6% revenue compound annual growth rate (CAGR) and up to a 13.6% profit CAGR for the FY2024 to FY2029.
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However, three catalysts could narrow this gap, he notes.
These include stronger-than-expected performance in the group’s international defence segment, the transition of ST Engineering’s aviation asset management business to a fund structure and lastly, potential merger and acquisitions (M&A).
On the other hand, downside risks include a slower revival in the commercial aerospace (CA) sector, lower margins from higher costs caused by supply chain issues, delays in the delivery of orders and lower-than-expected contributions from acquisitions.
As at 5.04 pm, shares in ST Engineering are trading five cents lower or 0.64% down at $7.82.
