Analysts from RHB Group Research and CGS-CIMB have maintained their &ldquo buy&rdquo and &ldquo add&rdquo calls and unchanged target prices on Singapore Technologies Engineering (ST Engineering), with RHB handing the stock a target price of $4.60 and CGS-CIMB putting their target price at $4.53.

 

RHB analyst Shekar Jasiwal says ST Engineering&rsquo s recent share price correction is a &ldquo buying opportunity.&rdquo Based on his estimates, ST Engineering&rsquo s is now trading at 18.2x its FY2023 earnings per share (EPS), which is below the six-year average P/E of 19.8x.

 

He is of the view that the current price correction was caused by lower than expected earnings for the 1HFY2022 ended June, as well as concerns around its growing debt levels in a rising interest rate environment.

However, the analyst sees &ldquo no changes in ST Engineering&rsquo s growth outlook and maintains that it should deliver defensive growth beyond 2022, aided by a revival in global aviation traffic, gains from growing demand for smart-city solutions, and rising global defence spending.&rdquo

 

Furthermore, Jasiwal expects the company&rsquo s distribution per share (DPS) of 16 cents to remain steady and forecasts an 8% core profit compounded annual growth rate (CAGR) from FY2021-FY2024.

 

Most notably, the recent $1.4 billion contract win by ST Engineering&rsquo s Urban Solutions & Satellite Communications (USS) segment in Taiwan is a &ldquo strong order win&rdquo . For context, the USS business has been reporting an average quarterly order win of $340 million since 1QFY2021.

 

The latest contract win will see ST Engineering providing turnkey rail services, including rail electronics solutions as well as above-ground train depot design, construction and equipment fit-out, for the new Kaohsiung MRT Yellow Line.

 

Separately, CGS-CIMB analysts Lim Siew Kee and Kenneth Tan also broadly agree with Jasiwal, noting the company&rsquo s strong quarterly order wins and record order book.

 

ST Engineering reported its highest order book of $22.2 billion, excluding the Kaosiung contract, which implies a book-to-bill ratio of 2.7 years. Around $4.6 billion of this order book is expected to be delivered in 2HFY2022, representing 100% of their 2HFY2022 revenue estimates.

 

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Pointing at the Kaosiung contract, Lim and Tan say that it is the largest-ever rail project win for ST Engineering, and they see the potential for further smart mobility wins, given that the large contract size could increase global awareness of ST Engineering&rsquo s smart mobility solutions, and it could see cross-selling opportunities via TransCore.

 

Several notable rail contracts won by ST Engineering in recent years include the Kaohsiung MRT Red Line Extension ($445 million) and North-South and East-West Lines in Singapore ($180 million).

 

As for its share price weakness, Lim and Tan think that the market may have underappreciated ST Engineering&rsquo s efforts to optimise costs to close the gap from the loss of Covid-19 related grants and tackle inflation pressures.

 

They note that the pension restructuring (resulting in a $72 million gain) is not mandatory, but on a &ldquo voluntary basis&rdquo by ST Engineering. As such, they believe that ST Engineering&rsquo s efforts to optimise costs continue to ensure margin improvement while chasing topline growth.

 

SINGAPORE - Singapore Technologies Engineering (ST Engineering), through its subsidiary Urban Solutions, has clinched a $1.4 billion contract to provide turnkey rail services for the new Kaohsiung MRT Yellow Line in southern Taiwan.

 

The deal includes providing rail electronics solutions as well as above-ground train depot design, construction and equipment fit-out.

 

The contract, which was awarded to Urban Solutions as part of a consortium, will also see the ST Engineering unit spearheading overall project management and serving as the systems integration lead, said the group in a bourse announcement on Thursday.

 

ST Engineering will also provide the communications system, automatic fare collection system, platform screen doors, traction electrification system, depot design and construction, and depot maintenance equipment for the Yellow Line. Works are expected to start by late 2022 over a period of 10 years.

 

" Winning this landmark Yellow Line project demonstrates the industry' s confidence in our unique strengths and attests to our capability in moving up the value chain to deliver full turnkey rail services, systems integration and project management," said Mr Chew Men Leong, president of Urban Solutions at ST Engineering.

 

ST Engineering said the contract is not expected to have a material impact on its net tangible assets per share and earnings per share for the current financial year.

 

The Yellow Line is Kaohsiung' s newest rail infrastructure programme. It runs along a 22.8km route that comprises 23 stations. When completed, it will link the city' s existing red and orange lines and improve connectivity to Kaohsiung' s six key districts, universities and schools. Ridership for the new line is estimated at about 1.2 million, which translates to nearly 42 per cent of the city' s total population.

 

" This significant win following our Kaohsiung MRT Red Line North Extension contract reinforces our position as a global Smart City participant and brings us closer to achieving our Smart City growth ambitions," said Mr Chew.

 

DEFENCE and engineering group ST Engineering is venturing into the data centre cooling market with the launch of a cooling technology that supposedly helps operators in tropical climates achieve 20 per cent in energy savings, which translates to about S$104 per kilowatt-hour of heat load every year.

 

Using a data centre with a power load of 20 MW as an example, a 20 per cent reduction in energy consumption translates to 14 gigawatt-hour of electricity savings annually &mdash enough to power 3,200 4-room public housing flats over a year. 

 

Assuming an electricity tariff rate of S$0.299 per kilowatt-hour, this could mean cost savings of up to S$4 million a year, said representatives of ST Engineering at the launch of the new cooling system on Wednesday (Jul 13). 

 

In this scenario, carbon emissions are also reduced by 20 per cent, which is equivalent to 5,600 tonnes of carbon dioxide equivalent annually. 

 

While ST Engineering did not wish to reveal the cost of a single module of the Airbitat DC cooling system, representatives said data centre operators would be able to recover their initial capital expenditure from incorporating the technology in 3 years. 

 

According to Gareth Tang, head of urban environment solutions at ST Engineering, the cooling technology itself has been researched over the past 8 years and implemented in the market for the past 5 years for the cooling of factories and industrial spaces. This is the first time it will be used for data centres. 

 

Data centres are known to be highly energy-intensive as a lot of heat is generated by the servers and chillers are used to cool them. 

 

The energy required to cool data centres is even higher in tropical countries like Singapore due to its hot and humid climate. 

 

In Singapore, data centres account for about 7 per cent of total energy consumption, and this is expected to rise to 13 per cent by 2030. The cooling of data centres make up 40 per cent of energy consumption. 

 

&ldquo The global digital transformation is accelerating and data centres are at the core of this digital transformation. Therefore, it is all the more important now, that we are to develop sustainable solutions for the future data centres,&rdquo said Tang. 

 

For data centres with conventional cooling systems, heat generated by server racks in the data hall are channelled back to the computer room air handler (Crah), where chillers generate chilled water to cool the heat. The cooled air is then supplied back to the server racks. 

 

Such systems are totally dependent on chillers, which are energy-intensive and generate large amounts of waste heat into the environment. 

 

By combining the Airbitat DC cooling system with existing chillers, water is first cooled to about 26 deg C through the natural process of evaporation, with the help of fans. 

 

This partially cooled water then enters a dual-coil Crah, where it pre-cools the heat from the data servers to about 29 deg C. 

 

This pre-cooled air is further cooled to about 22 deg C, using chilled water produced by the chiller, and channelled back to the servers. 

 

So while the chillers are still being used, Li Fuyun, head of sustainable cooling for urban solutions in ST Engineering, said the cooling technology reduces their heat load by about 40 per cent, without the use of compressors and refrigerants. 

 

Li said the new cooling system would be able to reduce 7 per cent of urban heat island effect for tropical climates. 

 

The technology is also designed for data centres in temperate climates, where the load on the chiller could be reduced by about 71 per cent, resulting in energy savings of about 43 per cent. The urban heat island effect could go down by 90 per cent, he added. 

 

Li added that the cooling system has a life cycle of about 20 years, including maintenance. 

 

Tang said the company would be looking to market this cooling system to data centres both in Singapore and overseas, and that they are already in discussions with some data centre operators. 

 

While he declined to reveal which companies ST Engineering are in discussions with as it is still in the pilot stage, he said these operators have a local presence with a global footprint. 

 

He also declined to share whether ST Engineering had any sales targets to meet.