STE

STE: The Group has been awarded a contract by the Ministry of Defence (MINDEF) for the design and build of eight new vessels. These new vessels will replace the Republic of Singapore Navy’s existing Fearless-class Patrol Vessels, indigenously designed and built by ST Marine in the 1990s. No further details could be released on the contract. Design of the vessels will commence immediately and the delivery of these vessels is expected to be from 2016 onwards. The Group’s marine arm, Singapore Technologies Marine Ltd (ST Marine) will build the eight vessels at its Singapore Benoi Yard. Singapore Technologies Electronics Limited (ST Electronics), the Group’s electronics arm, will supply the core combat systems and combat system integration solutions. MS previously noted that they are concerned about 1) weaker margin as the company ramps up new businesses; 2) lower earnings growth between 2012 and 2014; and 3) weakening USD affecting earnings. Valuation full at 19.8x forward P/E, more than 1 standard deviation vs. its 5yr avg of 16.9x.