ST Engineering's Operational Outlook Improving; Higher Debt, Amortization Dampen Net Profit

Singapore Technologies Engineering, or STE, is driving growth through improved utilization of its capital alongside a plan to contain costs. It has sold and continues to offload noncore activities to focus on areas that will provide synergies to its key aircraft maintenance and smart city activities. In this regard, it is adding proprietary product makers to its stable. Overall, we see STE’s EPS growing a five-year compound annual growth rate of 13%, marking an improvement over the 2.7% pre-pandemic 10-year average, which reflects the pandemic recovery as well as the purchase of U.S. toll road services provider, TransCore and an expansion of its passenger-to-freight, or P2F, activities. The latter will help drive post-2024 earnings growth.