In this series, we will feature one Singapore-listed company each time as a quick guide to everything you should know about it in 60 seconds.
In this instalment, we have Singapore Technologies Engineering Ltd (SGX: S63) (ST Engineering), a global engineering group. Previously, we featured another conglomerate Sembcorp Industries Limited (SGX: U96).
What’s ST Engineering’s Business About?
ST Engineering is an integrated defence and engineering group with four main business segments of aerospace, electronics, land systems, and marine.
The bulk of ST Engineering’s revenue comes from its aerospace sector, as seen from the chart below:
Under the aerospace segment, ST Engineering provides airframe, engine and component maintenance, repair and overhaul (MRO), engineering design and development, technical services, material support, asset management services, and pilot training.
Next, the electronics segment is involved in the design, development and integration of advanced electronics and communications systems. These systems include broadband radio frequency and satellite communication, e-Government solutions, rail and traffic management, and so on.
Moving on, the land systems segment provides design and engineering services, manufacturing of military and commercial vehicles, automotive subsystems, armament, weapons, weapon systems, ammunition and explosives.
Furthermore, it offers engineering services for assembly, upgrading/modifications, and MRO of vehicles and weapon systems.
Next, the marine segment provides shipbuilding, ship repair, and ship conversion services for a broad range of naval and commercial vessels.
As a whole, commercial customers contributed to 69% of 2018’s total revenue while defence customers pitched in the remaining 31%.
In terms of geography, Asia contributed to 62% of revenue, the US brought in 20%, Europe contributed 11% while the remaining 7% is categorised as “Others”.
ST Engineering’s Financial Highlights
The following table shows the financial highlights of ST Engineering:
|Revenue||S$6.54 billion||S$6.34 billion||S$6.68 billion||S$6.52 billion||S$6.70 billion|
|Net profit||S$532.0 million||S$529.0 million||S$484.5 million||S$502.6 million||S$494.2 million|
|Return on equity||24.9%||24.8%||22.2%||22.7%||22.0%|
|Order book ||S$12.5 billion||S$11.7 billion||S$11.6 billion||S$13.4 billion||S$13.2 billion|
ST Engineering’s revenue inched up slightly from S$6.54 billion in 2014 to S$6.70 billion in 2018. However, its net profit fell from S$532.0 million to S$494.2 million during the same time frame.
With that, return on equity (ROE) dipped from 24.9% in 2014 to 22% in 2018. Despite the fall, ROE is still respectably above 15%. ROE reveals how capable management is in growing shareholders’ money.
ST Engineering’s Dividend History
ST Engineering has kept its dividend steady at S$0.15 per share over the past five years.
|Total dividend per share
Major Risk for ST Engineering to Take Note Of
ST Engineering’s marine sector has been a drag on its overall business.
With the depressed oil price, the shipbuilding segment of the oil and gas industry entered a lull period as ship owners scaled back on their newbuilding orders while waiting for market conditions to improve.
In 2014, the year when the oil price crashed, this segment’s revenue stood at S$1.34 billion, but this dwindled to S$574.0 million in 2018.
Potential investors of ST Engineering have to be aware of this headwind surrounding the company’s marine sector.
ST Engineering’s Share Price and Valuation
Over the last five years, ST Engineering’s share price has increased by around 22%.
Right now, ST Engineering’s share price is at S$4.27. At that price, it has a price-to-earnings (PE) ratio of 25 and a dividend yield of 3.5%.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.