Light at end of tunnel for ST Engineering?

Being Singapore’s aerospace and defence group, one wonders whether ST Engineering has lost its investment fortress. Revenue has stagnated since FY2012 and net profit plunged from $576.2 million in FY2012 to $484.5 million in FY2016. Due to the declining financial performance, the stock price had also dropped from a high of $4.45 in FY2013 to the current $3.36 level.

Is ST Engineering a value trap or bargain buy now? This article will examine the merits and risks of investing in this government-linked company.

Land Systems

Firstly, as a defence group, ST Engineering enjoys a defensive fortress in Singapore as its Land Systems sector supports the Singapore Armed Forces (SAF) to modernize our fighting forces through major projects like the next-generation Armoured Fighting Vehicle. It also provides engineering solutions for various weapons and ammunition systems. For 3Q2017, commercial sales and defence sales constituted 63% or $1.0b, and 37% or $0.6b respectively of Group revenue.

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