ST Engineering - OCBC Group Research 2026-01-21: Re-rating Story Intact

• ST Engineering (SGX:S63) (STE) is one of the few leading defence proxies in the region and is well-positioned for growth given its:
  1. meaningful exposure to defence-related manufacturing which is currently in a multi-year defence spending upcycle;
  2. - Read this at SGinvestors.io -
  3. continued ramp-up of its passenger-to-freighter conversion business which will support growth.
• About a third of the group’s business is defence related. In FY24, the group secured new contracts of S$12.6b, bringing the total order book to S$28.5b.

One-off items mask resilient core performance and strong order visibility.

• ST Engineering's share price has risen ~14% year-to-date, following a strong 81% gain in 2025, and has outperformed the Straits Times Index (STI) for three consecutive years.
• - Read this at SGinvestors.io -
• In FY25, ST Engineering completed several divestments, including LeeBoy, SPTe, CityCab and STARCO, generating total divestment gains of S$306m. However, this was offset by impairment losses of S$689m related to iDirect and JetTalk, resulting in a net one-off loss of S$383m. Despite these impairments, we believe ST Engineering’s core businesses remained resilient with robust order momentum.

Defence stocks continue to find favour in the current global environment.

• Read more at SGinvestors.io.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2026-01-21

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