ST Engineering - Stock Analyst Research

Target Price* 4.500
Recommendation ACCUMULATE
Market Cap*-
Publication Date4 Mar 2024

*At the time of publication

ST Engineering - Defence and security led earnings growth

  • FY23 net profit was in line with our expectations. Net profit was affected by several one-offs amounting to S$66mn. Excluding these, net profit would have grown by 23.7%.
  • Defence and Public Security (DPS) (+40.1% YoY) led earnings growth, with digital sytems and cyber the largest growth engine. Commercial aerospace (CA) grew 47% YoY (excluding one-off items) with increased MRO demand and improved margins from passenger-to-freighter conversions. Urban solutions and Satcom (USS) incurred loss on divestment and severance costs on restructuring. Transcore turned profitable in 4Q23. Orderbook remained strong at S$27.4bn.
  • We maintain our FY24e earnings forecast and TP of S$4.50. DPS would remain the key earnings driver in FY24e, underpinned by digital solutions, AI-enabled command and controls, and cybersecurity. Due to recent price appreciation, we downgrade our recommendation to ACCUMULATE from BUY.




The Positives

  • Aerospace MRO revenue rose 41%, as demand surged in tandem with recovery in air travel. The passenger-to-freighter conversion business has also scaled the learning curve and is turning profitable. However, commercial aerospace FY23 EBIT margin fell 1.5% pt to 8.6% due to higher manpower costs.


  • Defence and public security posted EBIT growth of 40%. Despite the flat revenue, EBIT margin gained 3.8% pt to 13.3% due to better product mix and absence of US Marine losses. The largest sub-segment, digital systems and cyber accounted for 39% of total revenue (FY22:35%).


  • Net debt was marginally lower at S$5.8bn (Dec 22: S$5.9bn), but net debt to EBITDA improved to 4.2x, from 5.0x in Dec 22 due to stronger EBITDA. Management remains focused on paring down the debt. The dividend is expected to be maintained at 16 Sct/share.  



The Negative

  • Restructuring at Satcom and divestment of SatixFY resulted in a S$24mn loss at USS. On a positive note, Transcore turned profitable in 4Q23, and is expected to lift USS’ EBIT from FY24e.

About the author

Peggy Mak
Research Manager

Peggy has been a sell-side equity analyst for 22 years and a fund manager for 15 years.

Latest Reports

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066