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Broker's take: Maybank Kim Eng raises ST Engineering to 'buy'

ANALYSTS at Maybank Kim Eng have upgraded their call on ST Engineering to "buy" and increased their 12-month target price on the stock by 23 per cent to S$4.15 from S$3.17 on the back of growth catalysts in a recovering engineering industry.

The analysts cited ST Engineering's focus on forging greater integration across its businesses as a "big positive", saying the move could translate to an upside on revenue (cross-selling) and cost synergies (central procurement, standardised systems) in the next two to three years.

Among its business segments, the aerospace maintenance, repair and overhaul business, which is recovering due to increased global trade, has seen some capacity rationalisation and growth in the global aircraft fleet, said the analysts.

Moreover, they cited a steady demand for transport and satellite communications solutions for ST Engineering's electronics division, and new drivers from smart-city, and information and communications technology solutions.

Land systems, which had previously been affected by the performance of its Chinese units, "holds growth promise in the autonomous mobile robot market with its Aethon acquisition".

However, the analysts highlighted: "Prospects for the marine sector remain challenging in the near term but cost rationalisation has been largely completed and an oil price recovery may alleviate the situation sooner than expected."

ST Engineering shares were trading up S$0.04 or 1.2 per cent at S$3.42 as at 10.18am.