Overview of ST Engineering’s Performance

ST Engineering (STE), a leading conglomerate based in Singapore, concluded 2024 on a strong note with impressive order wins across its key business segments. The company reported solid fourth-quarter order wins amounting to S\$4.3 billion, reflecting a 37% year-on-year (YoY) growth. These gains were primarily driven by robust contributions from its Defence and Aerospace units.

Key Highlights

• 4Q24 order wins saw a significant quarter-on-quarter (QoQ) growth of 99% and YoY growth of 37%.
• Order wins in Commercial Aerospace reached S\$1.8 billion, driven by engine maintenance, repair, and operations (MRO) contracts, including a LEAP-1B contract with Akasa Air, and nacelle contracts.
• Defence orders totaled S\$1.7 billion, supported by contracts for armoured vehicle design and production in Kazakhstan, 155mm ammunition, AI cloud infrastructure, cyber security solutions, and shipbuilding contracts.
• Urban Solutions and Satellite Communications (USS) secured S\$0.7 billion in orders, driven by rail contracts in Asia, tolling contracts in the US, and Satcom projects.

STE is expected to report 2H24 results on February 27, 2025, with an anticipated net profit of S\$366 million, reflecting a 24% YoY growth. The company’s revenue for the second half of 2024 is projected at S\$5.9 billion, a 13% YoY increase.

Peer Analysis and Insights

Commercial Aerospace Sector

Several notable companies in the commercial aerospace segment were analyzed, highlighting their market performance and financial metrics:

• AAR Corp (AIR US): With a market cap of US\$2.4 billion, AAR Corp is trading at a 2025 forecasted P/E ratio of 15.8x. The company is not rated (NR) by CGS International.
• FTAI Aviation Ltd (FTAI US): Boasting a significant market cap of US\$12 billion, FTAI trades at a 2025 projected P/E ratio of 21.6x. Its recurring ROE is a remarkable 234.6%.
• General Electric Co (GE US): A heavyweight in the industry with a US\$219.6 billion market cap, GE has a 2025 forecasted P/E ratio of 37.2x, showcasing its strong position in the market.
• HEICO Corp (HEI US): HEICO has a market cap of US\$28.9 billion and trades at a high P/E ratio of 53.2x for 2025, reflecting its premium valuation.
• RTX Corp (RTX US): With a market cap of US\$172 billion, RTX is projected to trade at a P/E of 20.9x in 2025, supported by a recurring ROE of 13.0%.
• SIA Engineering (SIE SP): A Singapore-based player with a market cap of S\$1.9 billion, SIE is rated “Add” by CGS International, with a target price of S\$2.65, offering a dividend yield of 4.2%.

Urban Solutions Sector

The analysis extends to major players in the Urban Solutions segment:

• ABB Ltd: Trading with a 2025 P/E ratio of 22.1x, ABB demonstrates strong recurring ROE of 28.5% and offers a dividend yield of 1.8%.
• Fujitsu Ltd: Fujitsu, with a market cap of US\$41.4 billion, trades at a P/E of 19.5x for 2025, offering a recurring ROE of 15.8%.
• Siemens AG: Siemens has a market cap of US\$170 billion and trades at a 2025 projected P/E of 17.7x. It offers a dividend yield of 2.6% with a recurring ROE of 16.3%.

Satellite Communications Sector

Key players in the satellite communications space were evaluated:

• EchoStar Corp (SATS US): Despite being non-rated, EchoStar’s valuation metrics indicate a challenging outlook with no significant dividend yield reported.
• Iridium Communications Inc (IRDM US): Iridium is projected to trade at a P/E of 28.5x for 2025 with a recurring ROE of 30.5% and a dividend yield of 2.0%.

Defence and Public Security Sector

The defence sector analysis highlighted notable companies and their metrics:

• BAE Systems PLC (BAESY US): Trading at a 2025 forecasted P/E of 16.0x, BAE offers a dividend yield of 2.9%.
• Elbit Systems Ltd (ESLT US): Elbit is trading at a P/E of 31.2x for 2025 with a recurring ROE of 16.2%.
• Hanwha Aerospace Co Ltd: Hanwha’s 2025 P/E is forecasted at 17.0x with a strong recurring ROE of 25.6%.
• Lockheed Martin Corp (LMT US): With a market cap of US\$105.9 billion, Lockheed Martin trades at a P/E of 16.5x for 2025 and offers a dividend yield of 3.0%.

Conclusion and Recommendations

ST Engineering remains a top pick for investors, with analysts reiterating an “Add” rating and maintaining a target price of S\$5.30. The company’s diversified portfolio in Aerospace, Defence, and Urban Solutions positions it well for double-digit EPS growth in FY25. However, potential risks include prolonged Aerospace supply chain issues and challenges in turning around the Satcom segment.

Peer companies across various sectors demonstrate diverse growth metrics and financial performance, offering investors a wide array of opportunities depending on their risk appetite and sectoral preferences. Companies like GE, Hanwha Aerospace, and Siemens stand out for their solid financials and market positioning.