ST Engineering has set a 2026 revenue target of more than $11 billion, as it goes about capturing new opportunities across the board in smart city projects, defence and aerospace contracts.
This growth target means the company’s annual revenue growth rate got to be at two to three times faster that of the global GDP. “And our net profits will grow in tandem with our revenue,” says president and CEO Vincent Chong, speaking at the company’s investor day on Nov 16.
For FY2020 ended Dec 2020, the company reported earnings of $521.8 million and revenue of $7.2 billion. For 1HFY2021 ended June 30 2021, the company reported earnings of $296.1 million, up 15% y-o-y, on the back of a 2% growth in revenue to $3.65 billion.
To capture new growth, the company has in recent years made a string of significant acquisitions. Last month, it is offering US$2.7 billion to acquire Transcore, a traffic management business in the US. If and when completed, this will be ST Engineering’s largest acquisition ever.
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Chong maintains that even with the hefty investments, the company’s balance sheet remains strong. “Our strong capacity for dividend payouts has been maintained,” says Chong, adding that the company’s return on equity level of 20% is also seen to continue.
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The company recently announced its order book has hit a record $18.2 billion as of end September. Just yesterday, the company announced it has won a contract related to offshore patrol vessels ordered by the navy of United Arab Emirates.
It also announced the win of two new contracts, including one that is part of a smart city-related win in Brazil, an MRT-related contract in Taiwan.
ST Engineering expects its revenue from this segment, broadly defined as smart city solutions, to hit more than $3.5 billion come 2026 – double that achieved in 2020.
Chong acknowledges that the pandemic has delayed targets set in the company’s previous 2018 investor day for 2022 by between a year and two.
Nevertheless, he believes the company is well-positioned to capture new growth trends coming out of the pandemic.
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Specifically for the aerospace business, ST Engineering has set a revenue target of $3.5 billion come 2026.
He notes that many countries have achieved higher vaccination rates, and coupled with the pent-up demand for air travel, the company’s aerospace business is poised for recovery.
“Cities and countries are progressively opening up. When we do, we are doing so in a position of strength because we continue to invest in capabilities during the downturn,” says Chong.
Photo: Albert Chua/The Edge Singapore