Kevin Smith, of Delft Partners and portfolio manager of the TAMIM Asia Small Companies Fund, highlights one of the stocks in the Asia Small Companies portfolio, ST Engineering (S63.SGX).
Singapore Technologies Engineering (STE) (STEG.SI) is a global technology, defence and engineering group specialising in the Aerospace, Electronics, Land Systems and Marine sectors. Across the globe, STE brings innovation and technology together to create smart engineering solutions for customers in the defence, government and commercial segments. Sales are split, 39% Aerospace, 32% Electronics, 19% Land Systems, 9% Marine and 1% others. By customer type, 69% are commercial and 31% defence. STE has 22,000 employees of which 16,000 are performing engineering and technical roles.
Accounting, Strategy and Governance Comments
Value, Momentum and Quality Comments
STE has achieved improved VMQ scores throughout the past six months, with a top quintile rating in the past three months. STE consistently achieves exceptional quality scores together with acceptable valuation and the swing factor has been better momentum in the current year.
The return on equity in excess of 25% is a key driver of the high score for quality. The strong order book that feeds revenue in the following two years, provides a higher degree of certainty regarding revenue than is the case for the majority of the market.
STE has a good depth of coverage with 14 analysts providing research opinions, 13 have a buy or outperform rating on the company with a single hold recommendation. Multiple upgrades by analysts have been recorded for the company in the current year and no downgrades, this is a key factor in our improved rating for momentum.
STE operates a business with a combination of traditional order book of defence and engineering together with high technology aviation products and technology associated with “smart city” solutions. STE operates in full compliance of the accounting and governance rules in Singapore and maintains a strong, well qualified Board of Directors. The shareholder register is very stable with the Singapore Government investment arm Temasek as a controlling shareholder, allowing the company to invest for the long-term and in the best interests of shareholders.
At TAMIM we are committed to educating investors on how best to manage their retirement futures.
Sign up to receive our weekly newsletter:
TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.