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Three Things To Like About ST Engineering

Ser Jing - ST Engineering First Quarter Results, Unchanged Revenue and Profit (pic)You’ve heard about growth shares. You’ve heard about income shares. You may even have heard about cyclical and ethical shares. But how much do you know about the antitheses of ethical shares – “sin” shares?

Sin or vice shares are investments in companies that are, in some way, associated with industries that some might consider a tad unethical. These include the tobacco, alcohol, gaming and defence industries. There is a fifth, which I am sure you can work out for yourself.

Singapore Technologies Engineering (SGX: S63) is a play on the defence industry through its expertise in aerospace, electronics, land systems and marine sectors. One notable attribute about the defence industry is that it can also be defensive. In other words, the industry tends to perform well in both good times and bad. That is first thing to like about ST Engineering.

ST Engineering’s customers include not only the Singapore defence forces but also military customers in the UK, the US, New Zealand and Kuwait. And that is the second likeable attribute of the company – its wide geographic spread. Around two-thirds of the company’s revenues are generated in Asia; a quarter from the US and about a twentieth from Europe.

Finally, ST Engineering has over the years delivered some of the highest Return on Equity for shareholders. Over the last three years, the company has generated around $30 of profit for every $100 of equity invested in the business. By comparison, the 30 companies that make up the Straits Times Index (SGX: ^STI) has delivered around $9 for every $100.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.