Stock Buy Call: ST Eng with price target of 3.18 by ML

Merrill Lynch said it has resumed coverage of ST Engineering with a "buy" rating and a 12-month target price of 3.18 sgd per share given the firm's strong yield and decent growth prospects. "The dividend yield remains a key highlight as the group remains committed to a 100 pct payout ratio, translating to a yield of over 5 pct," Merrill Lynch said in its client note. The brokerage added it expects ST Engineering's earnings to grow as recent acquisitions are integrated into core operations and contribute to earnings. "We forecast an earnings CAGR (compounded annual grow rate) of eight pct over 2006-2008," it said. Merrill Lynch expects the firm's net profit, before exceptionals, to grow to 434 mln sgd this year from 396 mln last year, then to 474 mln next year, and to 508 mln in 2008. At 10.13 am, the stock was up 0.03 sgd or 1.05 pct at 2.88 with 557,000 shares traded.