With a share price rally of 42.8% year-to-date, ST Engineering (SGX:S63) is now the Straits Times Index’s top performer. Behind the gains is a story of strategic transformation, smart positioning amid global defence rearmament, and a clear five-year roadmap outlined at the company’s 2025 Investor Day on March 18.
Speaking to The Edge Singapore, CEO Vincent Chong attributed the optimism to ST Engineering’s delivery on fundamentals. In FY2024, the group posted a net profit of $702.3 million, up 19.7% y-o-y, on revenue of $11.3 billion, up 11.6%. A final dividend of 5 cents brought the full-year payout to 17 cents, and the company has committed to raise it to 18 cents in FY2025.
From FY2026 onwards, a variable dividend policy will kick in: one-third of annual profit growth will be distributed, with the rest retained for reinvestment. “We cannot control the share price, but we can provide clarity on how we pay dividends,” says Chong.
The company is targeting revenue of $17 billion by FY2029, with profit growing up to five percentage points faster. Segment targets include $7.5 billion from Defence & Public Security (DPS), $6 billion from Commercial Aerospace (CA), and $4.5 billion from Smart City and Satellite Communications (USS).
Order Book & Global Positioning
As of end-2024, ST Engineering held a record order book of $28.5 billion, roughly double pre-Covid levels, ensuring revenue visibility for the next few years. Notably, 30% of group revenue comes from the US, and the company is watching for potential knock-on effects from geopolitical events and trade tariffs under Trump’s presidency.
In response to increased global defence spending, ST Engineering has secured contracts in Europe and the Middle East, including a $100 million ammunition deal and vehicle partnership with Kazakhstan. The group has expanded its international defence reach through a localisation strategy — co-producing and transferring tech to clients overseas.
Satellite Communications and Urban Solutions
While satellite communications (Satcom) has lagged, with FY2024 revenue falling 14% y-o-y to $300 million, recent quarters show signs of recovery. Chong remains confident the business is turning around. Urban Solutions, the larger sub-segment, saw revenue rise 5% y-o-y to $1.71 billion.
Key to growth in this space is ST Engineering’s 2021 acquisition of US-based TransCore for US$2.68 billion, which launched New York City’s congestion pricing project this January. Although TransCore faced political backlash, including unfounded accusations of ties to foreign entities, Chong assured stakeholders of full compliance and robust security safeguards.
Investors Bullish on Defence Theme
Analysts have responded positively to ST Engineering’s ambitions. JP Morgan’s Karen Li has set a bullish $8 target, while Morningstar’s Lorraine Tan calls the company fairly valued at $6.50. OCBC has raised its fair value to $7.75, citing strong fundamentals and growth trends in aerospace and defence.
Group COO Jeffrey Lam expects aerospace revenue to grow 7% annually, outpacing the global sector’s 3% growth. The segment is scaling up its MRO capacity by 15% to 20% over the next two years.
Defence Stocks: From Taboo to Tactical
Rising geopolitical tensions and European rearmament have put defence investing in the spotlight. The EU’s Readiness 2030 plan includes over €800 billion in defence spending, amid reduced reliance on US support. Defence companies are now being viewed as essential to national security and increasingly included in ESG portfolios by managers like Amundi.
Despite ethical concerns, ST Engineering CEO Chong argues defence is a cornerstone of sustainability. “If you’re able to defend yourself and your citizens, is that not sustainable?” he says.
Positioning Ahead
As Europe builds its defence capacity, firms like ST Engineering and its peers across Asia are well-positioned to benefit. In the US, Palantir (NASDAQ:PLTR) is another example of a defence-tech hybrid seeing significant share price gains, up nearly 270% over the past year.
Singapore-based ST Engineering is now joining the ranks of global defence plays. With a balanced capital strategy, expanding addressable markets, and the ability to bridge commercial and defence sectors, ST Engineering has evolved into a formidable player in the reshaped security landscape.
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