Defence spending to benefit ST Engineering, Addvalue

[SINGAPORE] ST Engineering and Addvalue Tech are set to be key beneficiaries of a rise in defence spending by Singapore, said Maybank analysts Krishna Guha and Jarick Seet on Saturday (Mar 14).

Prime Minister and Finance Minister Lawrence Wong said in this year’s Budget address that the Singapore government is ready to spend more than the usual 3 per cent of gross domestic product on defence if the need arises.

Additionally, improving the ability to deploy, counter and operate alongside unmanned systems, such as drones, received “special mention” in the latest Budget, noted the analysts, along with strengthening the Republic’s cybersecurity capabilities.

Thus, their rating on ST Engineering was upgraded to “buy” from “hold”, with a higher target price of S$12.50, up 31.5 per cent from S$9.50.

The Singapore defence and engineering company’s order book for FY2025 grew by 16 per cent year on year to S$33.2 billion on the back of 49 per cent growth in new contract wins to S$18.7 billion.

“Half of the new contract wins came from defence and public security business, with international defence sales in Europe and the Middle East doubling on the year,” Seet and Guha noted.

Other analysts had also been positive on the group, such as RHB Group Research’s Shekhar Jaiswal. In a Mar 3 report, he said that defence and public security “should remain a structural growth pillar” for ST Engineering, due to the ongoing conflict in the Gulf.

In particular, the increasing use of unmanned systems for warfare in recent times, spotlights space and drone technology players such as Addvalue Tech.

This has led the Maybank analysts to reiterate the counter as a top small and mid-cap pick, as a “rare Asian space/drone play in rapid growth mode”.

Its customer base has reportedly increased from four or five clients around seven or eight years ago, to more than 20 clients as at 2025.

“Pace and size of orders has surged, backed by the increased sectoral activity, and it currently has a record US$26 million backlog,” said the analysts.

Earlier on Mar 13, Addvalue Tech had also said it has plans to achieve its “full potential” in its inter-satellite data relay system business, amid a growing push for space tech in Singapore.

The venture would involve capital market positioning strategies, and opportunities in the US market, according to the group.

Other global players in the Middle East, Europe and Japan have similarly ramped up defence spending in the last five years.

The analysts noted that Europe, the Middle East, North Africa and Japan have contributed to the growth of military expenditure with increases ranging from 0.4 to 1 percentage point of their GDP since 2021.

“Nato member countries agreed in June 2025 to invest 5 per cent of GDP annually on defence and security-related spending by 2035,” said the Maybank analysts.