The calmness with which St Engineering stock now appears on a chart is almost unsettling. As if not aware that it has doubled from its recent lows, it hovers just above SGD 10 and hardly moves some afternoons. Between meetings, traders in Singapore’s Raffles Place sip kopi and casually glance at the ticker. However, beneath that placid exterior, the business seems to have been subtly transforming into something more resilient than the majority of industrial companies.
The structure outside ST Engineering’s headquarters doesn’t exude ambition. It’s sleek, contemporary, and subdued. Workers arrive and depart with laptops and access badges, appearing more like engineers at a tech company than defense contractors. That small change is important. Investors appear to believe the business is no longer solely focused on maintaining aircraft or weapons. Satellites, software, infrastructure, and the unseen systems that cities now rely on are all connected to it.
The mood is explained by the numbers. The company’s order book increased to approximately SGD 32.6 billion, which is an uncomfortably high amount of unfinished business. Investors get a unique benefit from that backlog: visibility. It’s possible that this predictability—rather than excitement—is driving the stock higher. Boring can become useful in uncertain times.
There has been a discernible shift in the way that people discuss the stock over the past 12 months. It was once said to be steady, dependable, and even uninteresting. There is now a feeling that it could be more—a covert compounder operating inside the shell of a defense contractor. Instead of a cyclical wager, investors appear to think they are holding a long-term machine.
However, there is also hesitancy. The price-to-earnings ratio of the stock has risen above 40, which presents unsettling issues. By any measure, that is not inexpensive. It implies that investors are already footing the bill for unrealized future growth. Furthermore, it’s still unclear if the business can grow quickly enough to support that assurance.
The sectors in which ST Engineering works contribute to its allure. Global defense spending is increasing rather than decreasing. Drones, cybersecurity systems, and surveillance equipment are being ordered by governments. Airlines are returning planes for maintenance as they recover from the pandemic years. The physicality of the work is evident when one enters one of ST Engineering’s aerospace facilities: technicians examining engines, aircraft components arranged in tidy industrial rows, and machinery whirring in controlled settings. This technology isn’t speculative. It is ongoing, necessary, and real.
It is also supported by Singapore’s state investment arm, Temasek Holdings. Along with stability, that connection also raises expectations. Businesses associated with Temasek frequently have an implicit obligation to operate consistently. Investors appear to have faith that financial and political support will shield them during downturns, but this faith may be weakened if growth slows.
The performance of the stock has been outstanding. It outperformed Singapore’s overall market by delivering returns above 100 percent over the previous 12 months. One gets the impression from seeing that rise happen that it wasn’t fueled by hype. While more ostentatious tech companies made headlines elsewhere, it quietly rose to prominence.
Even though they are small, dividends have a purpose. The company’s reputation for dependability is strengthened by its regular payments. Consistency is more important to income investors than huge payouts. Avoiding gradual financial loss is more important than rapidly becoming wealthy.
However, there are still concerns about the future. International interest in defense companies has increased, but it may wane. Priorities in politics change. Budgets get more constrained. Even strong order books eventually shrink when they do. Perhaps more than long-term structural change, today’s optimism is a reflection of the geopolitical tension that exists right now.
Additionally, there is competition. ST Engineering doesn’t operate on the same scale as larger international firms like Airbus and BAE Systems. Growing globally entails taking on those titans head-on, which presents both opportunities and risks. International success could support the current valuation. Failure might reveal how costly the stock has grown.
