ST Engineering

ST Engineering: According to management, the broad strategic direction for the group is to bring existing products/services to new markets and to develop new product adjacencies/capabilities so as to capture a greater share of the value chain and wallet share of clients. The group engages in five-year strategic planning, which allows it to think ahead of the curve. For instance, the group has developed new capabilities such as interior refurbishment which will allow it to generate more work during the A & B check phases of the aircraft. This is in reaction to the shift towards a younger aircraft fleet, which would require more A & B checks rather than the heavy C & D checks. Again, in response to a younger fleet, additional maintenance capacity will be placed closer to airports to allow for shorter turnaround time, which the airlines demand during the lighter A & B checks. Newer maintenance capacity will also be larger to accommodate new plane types (eg, A380). The group has consciously grown beyond Singapore and its heritage as a defense contractor. Over the past decade, it has grown its US-based revenue by ~15% (from 11% to 26%), via acquisitions and investments in the US. Over the next 10 years, management expects China to form a larger share of revenues. In expanding overseas, the group believes in creating local teams with ‘local content’ to run operations, with Singaporeans making up only 10-20% of the team. Nomura has a NEUTRAL rating with TP of $4.31.