SINGAPORE: ST ENGG MAY PICK UP IF PRICE MAINTAINS ABOVE $2.20

SINGAPORE TECHNOLOGIES ENGINEERING LTD. (ST ENGG) is a global, integrated, engineering group with capabilities spanning the aerospace, electronics, marine, and land systems sectors. With more than 19,000 personnel in 42 cities around the world, it serves many of the world's leading commercial enterprises and defence forces. Through its four strategic business areas (SBAs) in the aerospace, electronics, marine, and land systems sectors, it delivers essential, comprehensive support and services around the clock.

Its share price is steady above $2.00 as it was supported with a series of book orders in the fourth quarter of 2008. The recent one was a GBP150 million contract from the U.K. Ministry of Defence to provide it with military vehicles. It may not impact the share price directly but is definitely helpful to support the price from falling in a bearish market.

Analysts have been making buy calls for ST Engg since the beginning of the year. On 16 January, UOB KayHian upgrades ST Engg to Buy from Hold, raises target price to S$2.83 from S$2.40 after assigning higher P/E of 16.5X vs 14.5X previously. On 5 January, Deutsche Bank reiterates Buy call with S$3.30 target price after recent string of contract wins and DBS Vickers upgrades to buy from hold with a price target of $2.80. Just before the new year, Nomura upgrades to buy from Neutral with a target price of $2.83 citing an attractive 7% yield and stable earnings growth

The price of ST Engg has been in the down trend since last year when price was around $3.40. It fell to S$2.00 in October and has found support. Since then, the price has been in a correction with a trading range between $2.00 and $2.58. The price is currently at $2.42. There is a strong resistance at $2.58. Price has tested this level for three times since November last year and unable to break it.

A break above this $2.58 resistance level would cause the price to rally with a price objective of $3.10 based on the triangle pattern formed in the current correction period. However, it may take great investor confidence to cause the price to rally and that seems to be lacking in the current market situation. Momentum readings from the Relative Strength Index (RSI) and Momentum indicators are generally weak and this means that there is no strength in any (bull or bear) direction.


Daily ST ENGG chart as at 6 February 2009 using NextVIEW Advisor. Click on chart for larger view.

With weak price momentum, expect the price of ST Engg to continue to trade within the same trading range in the near term. Low risk entry price is between $2.20 and $2.30. The bullish momentum should pick up if the price stays above $2.20. Let’s continue to watch this counter and see if it is able to break above the 2.58 resistance and if it does happen, then we can expect a rally.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.