Stocks

ST Engineering | Buy

Nov 18 close: S$2.88

Target price: S$3.22

OCBC Investment Research, Nov 18

In reaction to the weak Q315 results and lower FY15 PBT guidance, STE's stock price fell nearly 12 per cent from a close of S$3.30 on Nov 5 to an intraday low of S$2.92 on Nov 16. Note that we have also cut our rating to Hold with a lower fair value of S$3.22 (based on 19 times FY16F EPS).

However, we now see value emerging as the consensus PER has fallen back to below one standard deviation below the three-year average again. Hence we again upgrade our call from "Hold" to "Buy". While we are maintaining our fair value unchanged at S$3.22, do note that the company is still committed to paying out at least 90 per cent of its NPAT as divid…