The Motley Fool

Singapore Technologies Engineering Ltd’s Poor Track Record In Growing Its Business

Singapore Technologies Engineering Ltd (SGX: S63) is a large engineering conglomerate with business interest in various sectors, namely Aerospace, Electronics, Land Systems, Marine and others.

One of the things that I like to do when analysing a company is to study its track record. The past is no guarantee of the future. But historical information is the most reliable thing that we can use as our basis to forecast what lies ahead.

And this brings me to the main purpose of this article, which is to have a quick overview of STE’s historical business growth. The table below is a snapshot of the company’s important financial metrics from 2013 to 2017:

Source: STE FY2017 annual report

Here are a few points worth highlighting:

1. Firstly, the conglomerate’s revenue has not shown any signs of consistent growth for the timeframe under study. In fact, ST Engineering’s revenue in 2017 was slightly lower than in 2013.

2. Secondly, net profit has declined over the years, falling by 11.9% from S$580.8 million in 2013 to S$511.9 million in 2017.

3. Thirdly, the company’s net profit margin also declined from 8.8% in 2013 to 7.7% in 2017.

4. Lastly, the lower net profit had resulted in ST Engineering’s return on equity drifting from 27.4% in 2013 to 22.9% in 2017.

In sum, ST Engineering has delivered a poor performance over the past five years when it comes to growing its business. A big culprit would be weakness at its Marine business segment as a result of the decline in oil prices that started in 2014.

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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.