FY25 results were within expectations. Revenue/adj. PATMI were 97%/99% of our FY25e forecast. Headline earnings were a decline of 34% YoY to S$462mn due to S$667mn impairment of iDirect. FY25 adj. PATMI was up 21% to S$850mn.

2H25 earnings grew 23% YoY to S$448mn, supported by 25% and 15% jump in commercial aerospace (CA) and defence (DPS) operating earnings, respectively. Engine MRO and nacelle production were the key drivers of CA&rsquo s growth. Operating leverage and product mix also expanded margins, especially for DPS.

We raised our FY26e earnings by 11% to S$1.0bn. Orders expected to be delivered in FY26e are projected to grow at a 12.5% rate (FY25: +11.4%).

We increased our DCF target price to S$13.00 (prev. S$8.20), as we revise up our terminal growth rate assumptions. Our recommendation is raised from NEUTRAL to BUY. 

Defence spending globally is undergoing a major structural uplift. Geopolitical alliances are fracturing and threats re-emerging.  ST Engineering is looking to double its international defence sales. It is penetrating new markets with its track record, automation, localisation and neutrality. The higher valuations are supported by multi-year visibility into growth, scarcity and high ROEs of 33%.

But its operating profit climbs 22.5% to S$448 million

[SINGAPORE] ST Engineering recognised S$689 million in one-off impairment losses in its 2025 financial year, tied largely to its satellite communications (satcom) unit, iDirect. This weighed down its second-half net profit.

 

But group president and chief executive officer Vincent Chong noted on Friday (Feb 27) at ST Engineering&rsquo s full-year results briefing that activity is picking up in 2026, with more orders secured and cost cuts under way as the company focuses on turning the business around.

 

&ldquo Our priority remains supporting customers, executing the turnaround, and evaluating the strategic path forward for the satcom business,&rdquo he said.

 

Even as it evaluates &ldquo strategic actions&rdquo for the business, ST Engineering has implemented S$43 million in annualised cost savings for the satcom unit. It has more plans to bring these savings up to S$63 million.

 

For satcom, the group is targeting H1 revenue that is stronger year on year (yoy), following its dive in net profit for H2 FY2025.

 

The urban solutions and satcom segment sank into the red with a S$567.7 million loss in H2, reversing from earnings of S$31.1 million in the year-ago period.

 

However, the segment&rsquo s H2 revenue rose 6 per cent yoy to S$1.1 billion, from S$1 billion the previous year. Urban solutions drove the improvement, which was partially offset by lower satcom contributions.

 

ST Engineering reported a net profit of S$59.9 million for H2 FY2025, an 83.6 per cent decline from S$365.7 million in the previous corresponding period. Its operating profit for H2, however, stood at S$448 million, an increase of 22.5 per cent from S$365.7 million the year before.

 

The group&rsquo s revenue came in at S$6.4 billion for the half-year, up from S$5.8 billion in H2 FY2024.

 

Growth driven by defence and aerospace

As the group irons out its urban solutions and satcom business, its other two segments &ndash commercial aerospace, and defence and public security &ndash posted higher profits in FY2025.

 

ST Engineering&rsquo s commercial aerospace profits for H2 rose to S$319 million, from S$210.5 million in the year-ago period. The segment&rsquo s revenue increased 23 per cent to S$2.6 billion, from S$2.2 billion the previous year.

 

&ldquo This growth was contributed by stronger sales from engines, MRO (maintenance, repair and operations) and nacelles,&rdquo said Cedric Foo, group chief financial officer of ST Engineering.

 

The defence and public security segment reported S$551.4 million in H2 earnings, up from S$311.9 the previous year. Its revenue stood at S$2.7 billion, rising 5 per cent on the year from S$2.6 billion.

 

For the full year, commercial aerospace accounted for 40 per cent of the group&rsquo s revenue, and defence and public security made up 43 per cent. The urban solutions and satcom segment contributed 16 per cent of the revenue.

 

Overall, ST Engineering&rsquo s revenue stood at S$12.3 billion for FY2025, up 9.5 per cent from S$11.3 billion in FY2024.

 

Full-year net profit fell 34.1 per cent yoy to S$462.8 million, from S$702.3 million. 

 

Nonetheless, the group&rsquo s fiscal outlook remains positive. It cited contract wins, a strong order book and a structural shift in global defence spending.

 

As at Dec 31, 2025, its order book stood at S$33.2 billion, of which S$9.9 billion is expected to be delivered this year.

 

&ldquo Our record order book is a clear leading indicator of revenue growth in the years ahead,&rdquo said Chong.

 

Mervyn Tan, group chief operating officer for technology and innovation, as well as president of defence and public security, said: &ldquo We continue to stick to our assessment that the increase that we see in the investment in defence for various countries (appears) to be a structural shift.&rdquo

 

The group proposed a final dividend of S$0.06 per ordinary share and a special dividend of S$0.05 a share.

 

In total, the dividend for FY2025 is S$0.23 per ordinary share, translating to a dividend yield of 3.52 per cent.

Singapore Technologies Engineering, having doubled the value of international defence contracts won in 2025 over the preceding year, is aiming to repeat this feat this current FY2026.

 

According to Mervyn Tan, the company&rsquo s president for its defence and public security business, the company won around $600 million in international defence contracts last year.

 

ST Engineering is off to a strong start for FY2026 in this regard.

 

Earlier this morning, the company announced it has won a contract from the Qatari army worth &euro 315 million, or $470 million. Under this five-year contract, ST Engineering will help provide maintenance, repair and overall services for at least five different types of &ldquo platforms&rdquo .

 

The company hopes that this &ldquo milestone&rdquo contract will be the &ldquo vanguard&rdquo that can help open the doors for further similar contracts in this region, says Tan, who wears another hat as the group chief operating officer for technology and innovation.

 

ST Engineering joins other global defence contractors to enjoy a big run in the past year with renewed focus on weapons spending. However, its international defence revenue is relatively small.

 

For context, it won total contracts worth $18.7 billion in FY2025, bringing its total order book to $33.2 billion. Of the $18.7 billion won, $9.1 billion came from its defence and public security segment, with key wins such as the new generation Terrex infantry fighting vehicles for Singapore, plus various other maintenance and cybersecurity-related work.

 

When asked if a possible resolution of the fighting between Ukraine and Russia will lower defence spending as a result, the answer is &lsquo no&rsquo .

 

Besides land platforms, the company is in &ldquo quite advanced stages&rdquo in wooing other customers to buy its ships and other weapons, says Tan.

 

Specifically, it is trying to win orders for its Bronco all-terrain vehicle, and the Terrex infantry fighting vehicle. ST Engineering has teamed up with the likes of Italy&rsquo s Leonardo, which provides the turret that is mounted on the Terrex, to win new orders together.

 

According to Tan, besides those in the Middle East, potential customers with an &ldquo active interest&rdquo in its wares range from Finland, Austria and Sweden.

 

However, group president and CEO Vincent Chong cautions that while the company can have its ambitions, actual contract timings will depend on customers&rsquo own prioritisation and therefore will not always show up nicely and regularly in his order book.

 

Chong says he obviously hopes conflicts anywhere can subside, but, the level of activity now seen by the defence industry, while &ldquo related&rdquo , is a &ldquo separate track&rdquo .

 

&ldquo There&rsquo s a structural change in how countries view defence spending. This upward trend will last some time,&rdquo he says.

 

As such, Tan says the company is sticking to its assessment that increases in defence spending will continue to be a &ldquo structural shift&rdquo , based on conversations he has had with individuals in charge of arms procurement.

 

Even if fighting in Ukraine is to end, the &ldquo perception of threat&rdquo will remain, especially in the European theatre, and that countries around the world are gearing up to deal with the next threat that will emerge.

 

As indicated at the Nato summit last June, member states have committed to ramp up their defence spending to 5% of their GDP by 2035. &ldquo We have never seen such a commitment by the disparate states of Nato,&rdquo says Tan.

 

Beyond Nato, major countries like Canada and Japan, too are beefing up. &ldquo You get a very strong sense that this commitment to rearm, to reconstitute defence capabilities, is structural in nature. Our assessment is even if the current war subside, such spending patterns will continue,&rdquo says Tan.

But its operating profit climbs 22.5% to S$448 million

 

[SINGAPORE] ST Engineering recognised S$689 million in one-off impairment losses in its 2025 financial year, tied largely to its satellite communications (satcom) unit, iDirect. This weighed down its second-half net profit.

 

But group president and chief executive officer Vincent Chong noted on Friday (Feb 27) at ST Engineering&rsquo s full-year results briefing that activity is picking up in 2026, with more orders secured and cost cuts under way as the company focuses on turning the business around.

 

&ldquo Our priority remains supporting customers, executing the turnaround, and evaluating the strategic path forward for the satcom business,&rdquo he said.

 

Even as it evaluates &ldquo strategic actions&rdquo for the business, ST Engineering has implemented S$43 million in annualised cost savings for the satcom unit. It has more plans to bring these savings up to S$63 million.

 

For satcom, the group is targeting H1 revenue that is stronger year on year (yoy), following its dive in net profit for H2 FY2025.

 

The urban solutions and satcom segment sank into the red with a S$567.7 million loss in H2, reversing from earnings of S$31.1 million in the year-ago period.

 

However, the segment&rsquo s H2 revenue rose 6 per cent yoy to S$1.1 billion, from S$1 billion the previous year. Urban solutions drove the improvement, which was partially offset by lower satcom contributions.

 

ST Engineering reported a net profit of S$59.9 million for H2 FY2025, an 83.6 per cent decline from S$365.7 million in the previous corresponding period. Its operating profit for H2, however, stood at S$448 million, an increase of 22.5 per cent from S$365.7 million the year before.

 

The group&rsquo s revenue came in at S$6.4 billion for the half-year, up from S$5.8 billion in H2 FY2024.

 

Earnings per share for FY2025 stood at S$0.1484. 

 

Growth driven by defence and aerospace

As the group irons out its urban solutions and satcom business, its other two segments &ndash commercial aerospace, and defence and public security &ndash posted higher profits in FY2025.

 

ST Engineering&rsquo s commercial aerospace profits for H2 rose to S$319 million, from S$210.5 million in the year-ago period. The segment&rsquo s revenue increased 23 per cent to S$2.6 billion, from S$2.2 billion the previous year.

 

&ldquo This growth was contributed by stronger sales from engines, MRO (maintenance, repair and operations) and nacelles,&rdquo said Cedric Foo, group chief financial officer of ST Engineering.

 

The defence and public security segment reported S$551.4 million in H2 earnings, up from S$311.9 the previous year. Its revenue stood at S$2.7 billion, rising 5 per cent on the year from S$2.6 billion.

 

For the full year, commercial aerospace accounted for 40 per cent of the group&rsquo s revenue, and defence and public security made up 43 per cent. The urban solutions and satcom segment contributed 16 per cent of the revenue.

 

Overall, ST Engineering&rsquo s revenue stood at S$12.3 billion for FY2025, up 9.5 per cent from S$11.3 billion in FY2024.

 

Full-year net profit fell 34.1 per cent yoy to S$462.8 million, from S$702.3 million. 

 

Nonetheless, the group&rsquo s fiscal outlook remains positive. It cited contract wins, a strong order book and a structural shift in global defence spending.

 

As at Dec 31, 2025, its order book stood at S$33.2 billion, of which S$9.9 billion is expected to be delivered this year.

 

&ldquo Our record order book is a clear leading indicator of revenue growth in the years ahead,&rdquo said Chong.

 

Mervyn Tan, group chief operating officer for technology and innovation, as well as president of defence and public security, said: &ldquo We continue to stick to our assessment that the increase that we see in the investment in defence for various countries (appears) to be a structural shift.&rdquo

 

The group proposed a final dividend of S$0.06 per ordinary share and a special dividend of S$0.05 a share.

 

In total, the dividend for FY2025 is S$0.23 per ordinary share, translating to a dividend yield of 3.52 per cent.

Singapore Technologies Engineering, having doubled the value of international defence contracts won in 2025 over the preceding year, is aiming to repeat this feat this current FY2026.

According to Mervyn Tan, the company&rsquo s president for its defence and public security business, the company won around $600 million in international defence contracts last year.

ST Engineering is off to a strong start for FY2026 in this regard.

 

The company hopes that this &ldquo milestone&rdquo contract will be the &ldquo vanguard&rdquo that can help open the doors for further similar contracts in this region, says Tan, who wears another hat as the group chief operating officer for technology and innovation.

ST Engineering joins other global defence contractors to enjoy a big run in the past year with renewed focus on weapons spending. However, its international defence revenue is relatively small.

For context, it won total contracts worth $18.7 billion in FY2025, bringing its total order book to $33.2 billion. Of the $18.7 billion won, $9.1 billion came from its defence and public security segment, with key wins such as the new generation Terrex infantry fighting vehicles for Singapore, plus various other maintenance and cybersecurity-related work.

When asked if a possible resolution of the fighting between Ukraine and Russia will lower defence spending as a result, the answer is &lsquo no&rsquo .

Besides land platforms, the company is in &ldquo quite advanced stages&rdquo in wooing other customers to buy its ships and other weapons, says Tan.

Specifically, it is trying to win orders for its Bronco all-terrain vehicle, and the Terrex infantry fighting vehicle. ST Engineering has teamed up with the likes of Italy&rsquo s Leonardo, which provides the turret that is mounted on the Terrex, to win new orders together.

According to Tan, besides those in the Middle East, potential customers with an &ldquo active interest&rdquo in its wares range from Finland, Austria and Sweden.

However, group president and CEO Vincent Chong cautions that while the company can have its ambitions, actual contract timings will depend on customers&rsquo own prioritisation and therefore will not always show up nicely and regularly in his order book.

Chong says he obviously hopes conflicts anywhere can subside, but, the level of activity now seen by the defence industry, while &ldquo related&rdquo , is a &ldquo separate track&rdquo .

&ldquo There&rsquo s a structural change in how countries view defence spending. This upward trend will last some time,&rdquo he says.

As such, Tan says the company is sticking to its assessment that increases in defence spending will continue to be a &ldquo structural shift&rdquo , based on conversations he has had with individuals in charge of arms procurement.

Even if fighting in Ukraine is to end, the &ldquo perception of threat&rdquo will remain, especially in the European theatre, and that countries around the world are gearing up to deal with the next threat that will emerge.

As indicated at the Nato summit last June, member states have committed to ramp up their defence spending to 5% of their GDP by 2035. &ldquo We have never seen such a commitment by the disparate states of Nato,&rdquo says Tan.

Beyond Nato, major countries like Canada and Japan, too are beefing up. &ldquo You get a very strong sense that this commitment to rearm, to reconstitute defence capabilities, is structural in nature. Our assessment is even if the current war subside, such spending patterns will continue,&rdquo says Tan.

ST Engineering reported FY2025 earnings of $462.8 million, down 34.1% from FY2024, due to impairment losses and divestment gains. Excluding one-offs, the company&rsquo s net profit was a record $850.8 million, with revenue reaching a record $12.34 billion.