VTHM has also secured an option to build two similar PSVs and with all options exercised, the total value of the contracts could amount to $2.6 billion.
In a Thursday report, UOB analyst K Ajith says the full exercise of the option is highly likely as press reports have quoted the department of Homeland Security as requiring a total of six icebreakers.
In a separate report by Maybank on the same day, analyst Neel Sinha says the win comes after a prolonged drought of contracts for STE’s marine division and likely signals a turnaround for the division.
Taking into the latest win by VT Halter Marine, YTD order win by the marine division amounts to $1 billion, says Sinha, which is higher than the $991 million of contracts won for the whole of 2018.
More importantly, the single largest contract by VTHM in over a decade should also improve the division’s 3-5 year growth outlook as the project is a “breakthrough” for STE in terms of US defence contracts, adds Sinha.
Year to date, STE has already secured 65% of 2018’s $4.8 billion total contract wins, says UOB’s Ajith. The aerospace sector received contracts worth about $1.3 billion, including a 10-year maintenance contract to service 160 aircraft for a new airline customer.
The electronics sector also won contracts worth $818 million which included smart rail contracts for Bangkok MRT, Wuxi Metro and Taiwan Railway Authority.
Maybank is lifting STE’s FY21F profit forecast by 2% and target price by 1.5% to $4.30 from $4.25 while UOB has a target of $4.70.
As at 2.37pm, shares in STE are down 3 cents at $3.87 or 16.2 times FY21F earnings by UOB.
