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The 4 Ways Singapore Technologies Engineering Ltd Makes Its Money

Singapore Technologies Engineering Ltd (SGX: S63) is an engineering conglomerate with business interests in various sectors. It’s not a small company. Consider these measures:

  • Number of employees worldwide: around 23,000
  • Number of subsidiaries and associated companies: over 100
  • Cities and countries the company has businesses in: 46 and 24, respectively
  • Revenue in 2015: S$6.34 billion
  • Market capitalisation: S$10.2 billion

The last measure showcases the size of ST Engineering and the company is in fact, one of the largest listed entities in Singapore’s stock market. By virtue of its heft, ST Engineering has a spot amongst the 30 companies that make up the local market barometer, the Straits Times Index (SGX: ^STI).

I thought it’d be interesting to look at the company’s various revenue sources by parsing through its latest 2015 annual report. Doing so could also be useful and important for investors as it is crucial that one has an understanding of how a company earns its keep before committing any capital to it.

The following table shows the revenue contributions in 2015 for ST Engineering’s various business segments:

ST Engineering business segment table
Source: ST Engineering 2015 annual report

We can see that the company has four main business segments. Let’s have a few words about them.

In 2015, the Aerospace segment was the most important so we can start with it. The segment provides maintenance and engineering services for aircraft. Some of the services are airframe, engine and component maintenance, repair, and overhaul, and aviation materials and management services.

Electronics is the next biggest chunk of ST Engineering’s business and this is where the company delivers “innovative system solutions” to a wide range of clientele in the governmental, commercial, defence, and industrial sectors across the world. The segment’s specialisation is in the design, development, and integration of advanced electronics and communication systems.

Next, we have Land Systems, which “delivers integrated land systems, specialty vehicles and their related through life support for defence, homeland security and commercial applications solutions.”

Marine is the last of the big four and in here, ST Engineering builds ships and does repair and conversion work on vessels. Its clients are either navies or commercial entities.

Given what we’ve seen, suffice to say that ST Engineering has many moving parts to its business. This trait has allowed the company to remain resilient to challenges in any one segment. For instance, the Marine segment actually saw its revenue fall by 29% in 2015, and yet ST Engineering’s overall revenue decline was ‘just’ 3% during the year.

It’s also worth pointing out that ST Engineering has a geographically diverse business. Asia accounted for 74% of its total revenue in 2015, USA made up 23.5%, while Europe and ‘Others’ made up the rest.

Knowing how and whence ST Engineering earns its revenue can allow investors to make better-informed investing decisions.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned.