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Understanding How Singapore Technologies Engineering Makes Money

Singapore Technologies Engineering Ltd (SGX: S63), or STE, is an integrated engineering group with its core business in the aerospace, electronics, land systems, and marine sectors. The group ranks among the largest companies listed on the Singapore Exchange, with a market capitalisation of around S$12.2 billion, and it’s one of Asia’s largest defence and engineering groups.

With the group being so large, investors may find it difficult to understand its different divisions and core business. An important rule in investing is understanding a company’s business in order to discern how it makes money. Below is a summary of STE’s divisions and how they performed.

The Aerospace and Electronics divisions form the bulk of revenue, at around 68%. Land Systems makes up another roughly 22%, while the rest is Marine and others. Of the divisions, Land Systems saw the greatest year-on-year revenue increase (excluding “Others” as it is only a small contributor). Let’s take a brief look at each of STE’s divisions in order to gain deeper insights into what this blue chip company does.

Aerospace

STE’s Aerospace division operates a global MRO (maintenance, repair, and overhaul) network with facilities and affiliates in the Americas, Asia Pacific, and Europe. The division is one of a few MRO service providers in the world with the in-house engineering capabilities to offer customers a wide range of customised engineering and design solutions, including passenger-to-freighter conversions and aircraft seats.

Electronics

This division specialises in the design, development, and delivery of ICT products, solutions, and services addressing the needs of Smart Cities for Connectivity, Mobility, and Security. If 5G technology is active, STE’s Electronics division can enable devices to link up with the Internet of Things in order to enhance connectivity.

Land Systems

The Land Systems division handles products and services relating to military technology, defence, and security. Some examples are mobility solutions for defence and security, weapons and ammunition, and soldier systems.

Marine

STE’s Marine division is a turnkey provider of shipbuilding, repair and conversion, naval operations, and integrated logistics solution services as well as engineering services. Its customer base spans America, Europe, Asia, and the Gulf States.

Putting it all together

Hopefully investors now have a better understanding of what this group does to generate revenue. As its name implies, STE’s expertise is in engineering, and it can deliver a variety of engineering solutions in various segments to its clients. In subsequent articles, I will continue to explore other aspects of STE in order to provide further insights into this blue chip stalwart.

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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 Royston Yang does not own shares in Singapore Technologies Engineering Ltd.