ST Engineering: Three engines, one flight path

• ST Engineering is a Singapore-headquartered technology and engineering group spanning Commercial Aerospace, Defence & Public Security, and Urban Solutions & Satcom.

• Rising global defence spending supports Defence & Public Security growth, with SGD 3.6bn of new contracts secured in 1H2026 and international wins broadening its growth runway.

• Aircraft supply constraints and a growing next-generation engine fleet support Commercial Aerospace, with 1H2026 revenue and EBIT rising 15% and 29% YoY respectively.

• Structural urban transport investment supports Smart Mobility, while Satcom’s SGD 63m cost savings and targeted 4Q2026 EBIT breakeven provide an additional Urban Solutions & Satcom earnings driver.

• We initiate coverage with a HOLD recommendation and SGD12.0 target price, implying 10.6% upside as the strong year-to-date share-price gain has narrowed near-term valuation upside.

ST Engineering, one of Singapore’s leading industrial companies, has delivered close to 29% in year-to-date returns, reflecting stronger earnings outlook as its businesses benefit from favourable industry trends.

Aircraft delivery constraints are extending the maintenance cycle for airlines, defence budgets are rising as governments modernise capabilities and expanding urban transport networks are driving investment in rail and intelligent transportation systems. These trends are creating demand for new systems as well as ongoing maintenance, upgrades and lifecycle services. Against this backdrop, ST Engineering’s diversified portfolio spans three businesses with distinct growth drivers, which we examine below.

Company overview

ST Engineering is a Singapore-headquartered global technology, engineering and defence group with three reporting segments: Commercial Aerospace, Defence & Public Security, and Urban Solutions & Satcom.

Commercial Aerospace (CA) provides aircraft lifecycle solutions spanning airframe, engine and component Maintenance, Repair and Overhaul (MRO), aerostructures and systems, passenger-to-freighter conversion (PTF), and aviation asset management. Its MRO operations cover major airframe platforms and engines, including CFM56 and LEAP, while its aerostructures business manufactures nacelles and composite structures for aircraft OEMs.

Defence & Public Security (DPS) spans land systems, marine, defence aerospace, digital systems and cybersecurity, serving defence, public-security and critical-infrastructure customers in Singapore and overseas. Its activities include armoured vehicles and ammunition, naval systems and ship MRO, military aircraft support, command-and-control and other digital solutions, and cybersecurity. DPS contributed 43% of 1H2026 revenue, making it the Group’s largest segment.

Urban Solutions & Satcom (USS) comprises Urban Solutions and Satcom. Urban Solutions provides rail electronics and signalling, intelligent transportation and road-tolling systems, smart utilities and infrastructure, and electric-mobility solutions, while Satcom provides satellite-communications ground infrastructure and technologies for commercial and government applications. The businesses have different earnings profiles, with Urban Solutions driven by project execution and Smart Mobility demand, while Satcom remains in recovery following its restructuring.

Figure 1: DPS is ST Engineering’s largest business by revenue

Investment thesis

Global defence spending uptrend supports broad-based growth in ST Engineering’s Defence business

DPS benefits from both a steady domestic procurement base and expanding international opportunities. Singapore’s FY2026 defence expenditure is budgeted at SGD 24.93bn, up 6.4% YoY, with MINDEF maintaining a steady, multi-year investment approach to capability development and sustainment. Beyond Singapore, the international opportunity is broader, particularly in Europe and the Middle East. NATO members have committed to raise defence and defence-related spending to 5% of GDP by 2035, while European Allies and Canada are projected to account for 42.7% of total NATO defence spending in 2026, up from 40.7% in 2025 and 30.3% in 2021.

ST Engineering is positioned to capture both pools of demand through its broad portfolio across land systems, marine, defence aerospace, digital systems and cyber. Domestically, its Land Systems business secured the next-generation Infantry Fighting Vehicle programme, with progressive deliveries scheduled from 2028, while its Digital Systems business continued to win contracts for areas including high-performance GPU infrastructure, training and simulation, video intelligence and counter-drone systems. International wins are adding a broader growth avenue: ST Engineering entered the Qatar defence market with a five-year EUR 315m contract for military platform MRO and digitalised maintenance services, while its Marine business secured a six-year SGD 600m subcontract to design and supply platform systems for eight missile gun boats for the Kuwait Naval Force. The Group also continues to receive repeat international ammunition orders, alongside new counter-drone deployments in Asia.

The stronger order flow is translating into earnings growth. 1H2026 DPS revenue rose 7% YoY to SGD 2.82bn and EBIT increased 10% to SGD 404m, with growth across all sub-segments. The segment secured SGD 3.6bn of new contracts in 1H2026, supporting management’s target of more than SGD 7.5bn in DPS revenue by 2029. The domestic business provides a steady base, while international platform, ammunition and digital contracts broaden the opportunity for incremental revenue growth and backlog replenishment.

Related articles: Don’t mistake the pullback: Why Asian defence’s growth thesis remains intact

Growing and ageing fleets underpin a multi-year Commercial Aerospace growth runway

Commercial aviation is entering a multi-year expansion cycle. Airbus expects global passenger traffic to grow 3.6% annually through 2044, requiring around 43,400 new passenger and freighter aircraft and taking the in-service fleet above 49,000. Yet aircraft deliveries remain constrained, with IATA reporting an order backlog of more than 18,000 aircraft and a shortfall of over 5,000 replacement aircraft, pushing average fleet age to a record 15.2 years. Airbus also expects air cargo volumes to grow 3.3% annually through 2044, with 1,670 of the 2,605 additional freighters expected to come from PTF conversions. A larger and older fleet should support recurring airframe, engine and component MRO demand, while continued aircraft production and cargo growth support aerostructures, aircraft modifications and PTF conversions, creating a favourable demand backdrop across ST Engineering’s Commercial Aerospace portfolio.

ST Engineering is well placed to capture this opportunity through its scale, breadth and technical capabilities. Its integrated airframe and nacelle MRO centre in Singapore, opened in February 2026, combines both capabilities under one roof to streamline work scopes and shorten turnaround times. It was also the first independent MRO provider in Asia designated a CFM LEAP Premier MRO provider. The LEAP engine, jointly developed by GE Aerospace and Safran through CFM International, powers the Airbus A320neo family, Boeing 737 MAX and COMAC C919, making it the dominant engine platform for next-generation narrowbody aircraft. Its Singapore and Xiamen facilities are expected to exceed 400 shop visits annually by 2027. With global annual LEAP engine shop visits projected to rise from around 600–800 in 2025 to more than 5,000 by 2040 as the next-generation single-aisle fleet matures, ST Engineering is well positioned to capture a growing pool of next-generation engine MRO demand.

The benefits are already visible in earnings. 1H2026 Commercial Aerospace revenue rose 15% YoY to SGD2.69bn, while EBIT grew 29% to SGD 288m, driven by higher Engine MRO, nacelles and spares revenue, alongside favourable mix and productivity gains. Capacity additions and a rising contribution from engine and component MRO should support further revenue growth and margin expansion, with management targeting Commercial Aerospace revenue of SGD 6.0bn by 2029.

Smart Mobility growth and Satcom recovery broaden the earnings base

Urban transport demand is set to rise structurally, driving investment in the systems underpinning rail and road networks. The International Transport Forum estimates urban passenger transport activity could increase 60–70% by 2050, with expanding public transport infrastructure and greater use of road pricing among the key measures in its long-term scenarios. This supports demand for ST Engineering’s Smart Mobility solutions, spanning rail electronics, signalling, intelligent transport systems (ITS) and electronic tolling.

Government infrastructure spending is already translating into opportunities for ST Engineering across Singapore, the US and other international markets. In Singapore, LTA plans to expand the rail network to about 360km by the early 2030s and awarded ST Engineering projects in March 2026 for next-generation ITS covering traffic monitoring, traffic management and tunnel systems. In the US, TransCore, a subsidiary of ST Engineering, was selected in January 2026 for a nearly six-year USD 146m contract to upgrade the RiverLink tolling system across Kentucky and Indiana. Internationally, ST Engineering secured a USD 750m turnkey rail services contract for Taiwan’s Taoyuan MRT Green Line Extension in August 2026 and more than USD 100m of smart mobility projects in the Middle East in May 2026, including Qatar’s national ITS maintenance and GoParkin smart parking in Jordan.

As the smaller business within USS, Satcom provides an additional recovery driver alongside Smart Mobility growth. Satcom completed around SGD 63m of annualised cost savings in 1H2026 and is targeting EBIT positivity in 4Q2026 and FY2027. 1H2026 Urban Solutions revenue rose 14% YoY to SGD 945m, while USS EBIT increased to SGD 46m from SGD 12m, supported by higher revenue across both sub-segments and an improved margin mix. Continued execution of rail, tolling and ITS projects, together with Satcom’s cost recovery, should support further USS earnings expansion from its current base.

Valuation

ST Engineering’s earnings growth is supported by all three business segments, with new contracts secured across Commercial Aerospace, Defence & Public Security, and Urban Solutions & Satcom. Broad-based growth across the Group drove its order book to a record SGD 35.7bn at end-June 2026, supporting the Group’s progress towards management’s target of SGD 17bn in revenue by 2029. This broad order flow underpins our forecast mid-to-high teens EPS CAGR over the next three years, with earnings growth supported by multiple business drivers rather than a single segment.

Table 1: Recent order wins span all three segments

Date Announced	Segment	Order / Contract	Value	Expected Delivery / Term
23-Sept-26	CA	Hebei Airlines CFM56-7B engine PRSV agreement (Xiamen facility)	Not disclosed	2-year exclusive, from Sep 2026
7-Aug-26	USS	New Jersey Turnpike E-ZPass Services (TransCore) — recognised into order book in 2Q2026	USD 1.7b	11-year service term
31-Mar-26	DPS	Kuwait Navy Missile Gun Boats — platform-systems sub-contract via Abu Dhabi Ship Building	USD 465m	6-year, through ~2032
27-Feb-26	DPS	Qatar Emiri Land Forces MRO contract (via Barzan Maintenance Shield) — breakthrough into Qatar market	EUR 315m	5-year, through ~2Q2031
4-Feb-26	CA	Delta Air Lines airframe MRO renewal (A330/A350/767), signed at Singapore Airshow 2026	Not disclosed	5-year, 2026–2031
26 Jan 2026 (signed Dec 2025)	DPS	Titan (Terrex s5) Infantry Fighting Vehicle — Singapore MINDEF	Not disclosed	Deliveries begin progressively from 2028
Source: ST Engineering company announcements and newsroom releases (Jan–Sep 2026); trade and financial press; iFAST Compilations Data as of 29 September 2026.

We value ST Engineering using a fair P/E multiple applied to our 2028E underlying earnings. Given the different earnings profiles of its three segments, we derive segment fair P/Es from the 10-year average P/E of their respective listed peers, with an uplift for defence peers to reflect the recent sector re-rating. We then weight the segment multiples by their respective shares of Group operating profit, resulting in a blended fair P/E of 26x.

Table 2: Segment fair P/E derivation

Segment	Representative listed peers (10-yr average forward P/E)	Fair P/E
Commercial Aerospace	AAR Corp ~19x, MTU Aero Engines ~22x, StandardAero ~31x, SIA Engineering ~24x	24x
Defence & Public Security	Thales ~22x, Leonardo~19x, BAE Systems ~20x, SAAB~35x, Rheinmetall ~34x, Korea Aerospace~40x, Hanwha~32x (+1 standard deviation to reflect defence-sector re-rating)	29x
Urban Solutions & Satcom	Verra Mobility ~19x; Kapsch Traffic~18x, Alstom~17x, Hitachi~14x, Gilat Satellite~18x	18x
Blended	Weighted by 2028E segment EBIT (DPS ~51%, CA ~39%, USS ~10%)	26x
Source: Bloomberg Finance L.P., blended figures weighted by 2028E segment EBIT from iFAST estimates. Data as of 15 Sept 2026

Applying this multiple to our 2028E forecast EPS implies a target price of SGD 12.0, representing 10.6% upside from the current share price of SGD 10.85. While the earnings growth outlook remains intact, the strong year-to-date share-price gain has narrowed the valuation upside. We therefore initiate coverage on ST Engineering with a HOLD recommendation.

Table 3: ST Engineering earnings forecasts

ST Engineering	2025A	2026E	2027E	2028E
P/E Ratio (X)	56.2	31.7	27.2	23.7
Earnings growth	-34.2%	132.4%	16.8%	14.9%
EPS (in SGD)	0.147	0.342	0.399	0.459
Dividend Yield	1.5%	1.9%	2.0%	2.2%
Upside Potential Excluding Dividend				10.6%
Target Price (SGD)				12.0
Current Price (SGD)				10.85
Source: Company data (2024–2025); iFAST Research estimates (2026E–2028E). * 2026E 132.4% growth reflects a low 2025 base depressed by the one-off impairment. Data as of 29 Sept 2026.

Figure 2: ST Engineering share price vs earnings per share

Declaration

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report, including all investment theses, ratings, price targets and conclusions, has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.