[SINGAPORE] Shares of ST Engineering tumbled shortly after trading started on Thursday (Aug 14) despite the group announcing better first-half results pre-market opening. 

 

The counter dropped 6.3 per cent to S$8.40 at the close on Thursday, with 13.3 million shares having changed hands. It had closed at an all-time high the previous day at S$8.96. Investors may have taken profit after the counter&rsquo s impressive run-up in previous months.

 

Morningstar&rsquo s Lorraine Tan, director of equity research for Asia, told The Business Times: &ldquo The fall in ST Engineering&rsquo s share price can be attributed to overheated sentiment in the defence sector.&rdquo

 

Year to date, the stock had risen over 80 per cent. It hit S$8.94 on Jul 24, shortly after the company announced S$4.7 billion worth of order wins.

 

The company posted a 19.7 per cent increase in net profit to S$402.8 million for the first half-year ended June, up from S$336.5 million in the year-earlier period. This was largely due to revenue growth from its commercial aerospace as well as its defence and public security business segments, despite drag from US tariffs and foreign currency exchange.

 

Citi Research analyst Luis Hilado said in a July note that the 12-month price target for ST Engineering was S$8.40. Shares of ST Engineering were trading at S$8.27 at the time.

 

&ldquo We see ST Engineering&rsquo s top-line momentum driving operational leverage and margin improvement across its core businesses. We recognise the existence of near-term risks (labour shortages, cost inflation, integration risks) but take positively that a healthy base of contracts to win can provide the economies of scale to offset such,&rdquo Hilado wrote.

 

&ldquo We believe the steady and predictable growth in the current uncertain market conditions will drive it above its mean valuation,&rdquo he added.