The deal implies valuation multiples of 4.1x EV/revenue and 21.4x EV/EBITDA (based on 2024 figures), with an additional earn-out of up to $15 million contingent upon future return thresholds.
SPTel reports revenue of $71.5 million in 2024 and a net loss of $4.4 million.
ST Engineering says it will book a one-off gain of $83 million selling its 51% stake in broadband provider SPTel.
Jaiswal had earlier estimated that ST Engineering will repay some $500 million worth of debt this current FY2025. A further $140 million reduction in debt would increase STE’s earnings estimates by 1%.
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Given ST Engineering's $29.8 billion order book, Jaiswal sees "upside risk" to his estimates, given catalysts from stronger international defence demand, the aviation business’ transition to a fund model, and strategic merger & acquisition (M&A).
"A record-high orderbook ensures strong revenue visibility, supported by structural tailwinds, ie rising defence spending and sustained demand for core services," says Jaiswal, as he increased his target price to $8.70 from $8.65.
If rates continue to trend lower, he is projecting a target price of $9 with a new assumption of 2.25% in risk free rate versus 2.75% that he now uses.
For now, his FY2029 forecasts remain below the company's guidance of 8.6% revenue and up to 13.6% profit CAGR for the FY2024 to FY2029 period.
"While our estimates are ahead of consensus, the Street has been progressively revising forecasts upward," says Jaiswal.
ST Engineering shares are now trading at a record level of $8.42, up more than 80% year to date.
