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What Investors Should Know About Singapore Technologies Engineering Ltd’s Attitude Towards Innovation

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 an earlier article, I shared management’s thoughts on ST Engineering’s growth prospects, which I found to be interesting while reading the company’s latest shareholders’ letter. In this article, I want to discuss another area about the letter that I found to be intriguing: Management’s thoughts on innovation.

Here is the first excerpt (emphasis is mine):

“As a technology, defence and engineering Group, we need to keep pace with the speed of technology and market changes to develop new and innovative solutions for our customers. This is why ST Engineering has consistently been making strategic R&D investments in key disciplines and technologies within our core business sectors.”

From the quote above, I can gather that ST Engineering’s management team has given significant priority towards investing in innovation, as the company’s leaders view technology superiority as a necessity, given the kind of business the company is in.

The excerpts below give us an idea on what ST Engineering has been doing on the innovation front (again, emphases are mine):

“However, we want to raise our innovation quotient even further. To that end, we have actively promoted a greater innovative culture especially among engineers to experiment and venture beyond their comfort zones. We have also adopted open innovation by providing a dynamic innovation platform and springboard for collaboration in new and disruptive technologies.

In 2017, we launched an Open Innovation Lab (Open Lab), an engineering-based incubator that is first of its kind in Singapore. The Open Lab has participation from our own engineers as well as individuals and start-ups from outside the Group.

We also set up a Corporate Venture Capital unit with US$150m open-ended fund to invest in promising technology start-ups and early-stage companies. The unit made its first investment in Janus Technologies, a US-based endpoint cybersecurity provider, which helped ST Electronics launch its Black Computer, an industry-first hardware-based cybersecurity solution.”

In conclusion, we can see that ST Engineering’s innovation drive has both an organic as well as acquisitive component.

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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.