ST Engineering earnings dominated Singapore markets on 28 Feb after the group booked a S$689 million satcom impairment alongside a record S$33.2 billion order book. Shares of S63.SI last traded at S$10.02, flat on the day after opening at S$10.26. Despite a 34% drop in headline profit, core performance improved in the second half, led by defence and commercial aerospace. Local investors are weighing execution on the delivery pipeline, the satcom recovery, and a new progressive dividend policy targeted from FY2026.

Results snapshot: headline hit, core improves

Management recorded a S$689 million impairment in the satcom unit, which dragged FY2025 headline profit down 34% and H2 net profit by 83.6%. The charge reflects reassessment of satellite communications assets and contracts. Excluding one-offs, profitability was healthier, helped by steady defence demand. These details were disclosed on 28 Feb and reported by Business Times.

Core metrics improved in the second half as operating profit rose, with defence and commercial aerospace offsetting satcom weakness. The Edge Singapore noted FY2025 earnings of S$462.8 million, or S$850.8 million if one-offs are excluded, underscoring resilient underlying momentum and cost control. Order intake also stayed firm, supporting 2026 visibility (source). ST Engineering earnings quality will hinge on mix and execution from here.

Record order book and delivery runway

ST Engineering reported a record S$33.2 billion order book with S$18.7 billion in new contract wins for FY2025. The backlog spans multi-year defence programs, passenger-to-freighter conversions, and global MRO lines. For Singapore investors, the mix offers stability, since defence projects are typically long cycle and less sensitive to short-term swings, while aerospace provides cyclical upside as flight activity stays firm.

Record orders should convert into steady revenue through 2026, cushioning results while satcom restructures. Execution matters: timely parts supply, labour availability, and certification milestones can shift delivery phasing. Investors should monitor quarterly backlog burn and win rates in defence, nacelles, and P2F conversions. A strong pipeline reduces forecast risk and supports cash generation if working capital cycles improve. This will shape ST Engineering earnings next year.

Dividend policy, valuation, and technicals

TTM dividends total about S$0.17 per share, implying a 1.7% yield at S$10.02, with a payout ratio near 69%. Management outlined a progressive dividend policy to start from FY2026, aiming to grow shareholder returns alongside earnings sustainability. While near-term cash goes to capex and restructuring, predictable defence cash flows and improving aerospace margins can support gradual dividend growth over the medium term, aiding ST Engineering earnings stability.

At 41.5 times TTM earnings and 11.5 times book, valuation bakes in solid growth. Technicals are constructive: ADX 38.5 signals a strong trend, RSI 54 is neutral, and price sits near the Bollinger mid at S$10.03, with S$9.65 and S$10.42 as bands. A sustained close above S$10.42 could invite momentum flows, while a drop below S$9.65 risks a pullback.

Key watch items after the print

Focus remains on the satcom impairment and recovery path. Investors should look for asset sales, contract repricing, or platform pivots that lift returns above the cost of capital. Quarterly disclosures on backlog mix, margins, and any write-back potential will be key. Evidence of stabilising utilisation and new satcom orders would ease concerns and narrow the drag on ST Engineering earnings.

Net debt to EBITDA sits near 3.0 times, with interest cover around 5.2 times and a current ratio close to 1.0. Working capital is tight, shown by a 94-day cash conversion cycle. Watch operating cash flow and receivables collection as deliveries ramp. Strong cash generation would support dividends, capex, and optional deleveraging through 2026, underpinning ST Engineering earnings resilience.

Final Thoughts

ST Engineering earnings on 28 Feb showed a sharp headline hit from the S$689 million satcom impairment, but also stronger core operations and a record S$33.2 billion order book. For Singapore investors, the setup into 2026 is about delivery discipline, cash conversion, and proof that satcom can stabilise and earn acceptable returns. Near term, valuation is rich, so execution must deliver. Practical steps: track quarterly backlog burn, segment margins, and operating cash flow. For trading cues, watch S$10.42 for a breakout and S$9.65 as near-term support. Income investors should look for clarity on the FY2026 progressive dividend policy before sizing positions. As always, align exposure with risk tolerance and time horizon.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.