ST Engineering expects to book a one-off gain of $48.1 million from divesting a joint venture in Shanghai.
On Nov 17, the company says it will sell its 49% stake in Shanghai Technologies Aerospace Company (Starco) to JV partner China Eastern Airlines Corporation for $124.6 million.
The selling price implies Starco at an EV/EBITDA multiple of 11.2x, based on its FY2024 numbers.
Of the net proceeds of some $116.3 million, ST Engineering will use it to pay off debt, and estimates interest savings of around $4.2 million a year.
Starco contributed earnings of $7.5 million in FY2024.
In the past year, ST Engineering has been making a series of divestments, including its US construction machinery unit and a Singapore broadband JV.
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According to ST Engineering, the Starco JV was set up in 2004 to provide airframe maintenance, repair and overhaul (MRO) services out of facilities in Hongqiao and Pudong in Shanghai.
The initial plan was to run this JV for 20 years and following the expiry last year, the venture was extended but the partners decided to split.
"ST Engineering appreciates its strong collaboration with CEA and looks forward to supporting CEA as a valued customer moving forward," the company says.
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ST Engineering adds that its MRO presence in China has grown over the years, with "well-established" sites in Guangzhou and Xiamen. It recently opened another facility in Ezhou, Hubei.
"These strategically located facilities position the business to capture the growing MRO demand both in China and across the region," the company says.
"ST Engineering’s ongoing rationalisation of MRO facilities, along with the addition of newer and more modern MRO facilities, enhances its operational efficiency and strengthens the group’s competitiveness in the global MRO market.
"Even after factoring in the rationalisation of Starco and taking into account the ongoing airframe MRO capacity expansion projects in Singapore, China and the US, the group’s total capacity remains higher than pre-COVID levels, ensuring continued ability to meet customer MRO demand," adds ST Engineering.
ST Engineering shares closed at $8.49 on Nov 14, down 2.19% for the day but up 82.58% year to date.
