On Oct 28, the company reported record earnings of US$766.2 million ($1.07 billion) for 3QFY2022 ended September, up 34.7% y-o-y from US$576.4 million a year earlier. Revenue in the same period was up 10.2% y-o-y to US$18.88 billion. For the nine months ended Sept 30, earnings increased 46.3% y-o-y to US$1.93 billion; revenue was up 17.9% y-o-y to US$55 billion. Wilmar attributes the better numbers to all-rounded improvements in its various business segments.
“While external conditions are still challenging, we are confident that our integrated and diversified business model and sound risk management policies will enable us to overcome these challenges and achieve satisfactory performance for the rest of the year,” says Wilmar in its earnings commentary.
Exiting US marine business
Singapore Technologies Engineering has been buying back shares from the open market at mainly monthly intervals, albeit sporadically. The most recent purchase was on Nov 7 when it acquired 500,000 shares in the open market for between $3.31 and $3.36. This brings its total number of shares bought back under the current mandate to 5 million or a stake of 0.1604%.
On Sept 19, ST Engineering acquired 500,000 shares at between $3.69 and $3.71. On Oct 6, ST Engineering again acquired the same amount of shares at $3.51 each.
Despite ST Engineering’s perceived defensive nature, its shares are not immune to the market downturn. Year to date, the share price is down 11.44% to close at $3.33 on Nov 8. In the same period, the Straits Times Index is up slightly by 0.56%.
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On Nov 7, the company announced the sale of its loss-making marine business in the US for US$15 million. ST Engineering may receive earnout payments post-closing of up to an aggregate amount of US$10.25 million, subject to certain conditions.
DBS Group Research notes that these businesses have been loss-making for quite some years with no turnaround in sight. This is despite a “reasonably robust” order for 3 Polar Security Cutter vessels from the US Navy worth some $1.9 billion. However, ST Engineering is suffering from cost overruns from these projects.
With the disposal, ST Engineering’s order book is seen to remain “strong” given that it is at $25 billion as at end of September. In addition, ST Engineering will be booking a loss on disposal of $13 million, which is equivalent to around 2–3% of earnings. DBS says it has been ascribing negative margins to the shipbuilding business just sold. It might now review its margins upwards, pending the coming 3QFY2022 results. DBS has a “buy” call and a $4.70 target price on the stock.
DBS believes that the disposal though does not impact ST Engineering’s overall growth plans in the US, with its aerospace MRO operations and smart mobility business (Transcore) being key for the group. It also notes that ST Engineering is not exiting from the shipyard operations in Singapore, which is principally engaged in ship repair and defence shipbuilding for Asian markets.
