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What Investors Should Know About Singapore Technologies Engineering Ltd’s Growth Prospects

Singapore Technologies Engineering Ltd (SGX: S63) is a large engineering conglomerate with four main business segments, namely Aerospace, Electronics, Land Systems, and Marine.

The company recently published its annual report for the year ending 31 December 2017. Given that reading an annual report is one of the best ways to keep up with a company’s developments, I decided to go through ST Engineering’s latest annual report to understand the company’s prospects, and how it had performed in 2017.

Generally, when reading an annual report, I will pay close attention to the letter to shareholders that the company’s chairman and/or CEO writes. In this article, we will look at management’s thoughts on ST Engineering’s growth prospects, which I found to be interesting while reading the company’s latest shareholders’ letter.

[Editor’s note: An article discussing management’s thoughts on innovation at ST Engineering has been published. It can be found here.]

To begin with, management highlighted that the defence-related business of ST Engineering will not only remain a core component, but that investors can also look forward to growth in this area. Here are the comments from management (emphasis is mine):

“Our defence business remains core to us and we continue to strengthen and deepen the business and capabilities. Our participation in highly contested global defence programmes has helped enhance our reputation as a competitive defence business participant with advanced technologies and solutions that meet the needs and requirements of modern military and paramilitary forces.

With improving global economics and stronger focus on defence and homeland security globally, we are hopeful to gain a larger share of defence and related spending, predicated on a superior value proposition and international track record.

Another area of growth for ST Engineering that management has identified is in Smart City solutions. Below is what management said in the latest shareholders’ letter (again, the emphases are mine):

“Smart City solutions is a new strategic thrust that will drive new growth opportunities for the Group. We have already acquired strong domain expertise in Smart Mobility, Smart Security and Smart Environment. With the exponential advancement in technology, we see it as a strategic imperative to leverage and harness the collective genius of the Group to capture wider global opportunities in this area.

And we are in a unique position to do so – we have deep engineering expertise and wide technology capabilities across the Group to offer a comprehensive suite of Smart City solutions – be it rail or road solutions, emergency response systems, physical security or cybersecurity solutions, sensor networks for water and utility management or water treatment and waste management.”

In conclusion, we can see that ST Engineering plans to grow in two fronts: By expanding its defence-related business, and growing its new Smart City solutions business.

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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.