ST Engineering share price in explosive rally

It seems that Temasek Holdings had chosen the right man to lead ST Engineering. Prior to Vincent Chong taking on the top job in October 2016, ST Engineering share price had been roiled by a devastating corruption scandal news that broke in 2014. That episode saw ST Engineering share price collapsing from $4.40 in 2013 to a low of $2.70 in early 2016.

Since then, ST Engineering share price has finally seen glimpse of light at end of the tunnel. With a new CEO and a major rebranding exercise, this corporate behemoth appears to put to rest the haunting dark chapter.

ST Engineering share price

ST Engineering share price performance was indeed intriguing. I would have bought into this counter a couple of years ago if not for the appointment of the new CEO. Usually, I would avoid companies which experienced a change of leadership because of the need to give the CEO to implement his ideas. This is especially so as Vincent Chong’s background was previously from the oil and gas sector. But my concern proved to be invalid as Vincent Chong managed to revive the ailing ST Engineering share price.

As expected, the aerospace business provided the impetus for ST Engineering share price. In April 2019, ST Engineering announced a massive $1.3 billion aircraft maintenance contract win from a North America customer for its aerospace sector. Then in July, ST Engineering followed up another series of aircraft maintenance contract wins worth $809 million. ST Engineering share price rocketed subsequently.

As one of the two big boys in local aerospace MRO industry, will ST Engineering share price suffer similar fate as SIA Engineering share price? In my view, this is highly unlikely based on a few factors. In fact, the long-term outlook for ST Engineering share price should be positive.

ST Engineering share price in sunshine mood

As a strategic defence contractor in Singapore, ST Engineering enjoys an unassailable advantage over SIA Engineering. During the Singapore Budget 2019, the government announced focused spending on defence, security and diplomatic areas, which will constitute about 30% of total expenditure for this financial year. ST Engineering share price went ballistic since then, surging from $3.75 to the current $4.20.

The defence sector contributed 30% of revenue for 1QFY2019, providing critical support for ST Engineering share price. Further, ST Engineering is shifting from a Singapore-centric defence contractor to being an international one. This new approach saw ST Engineering winning a number of contract wins from foreign governments in FY2018, giving ST Engineering share price much needed boost.

In the area of aerospace maintenance, ST Engineering adopts [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: August 2, 2019 — 11:41 pm

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