ST Engineering shrugs off Middle East shocks, stays upbeat on satcom outlook

[SINGAPORE] Even as fuel and logistics costs rise, ST Engineering remains upbeat on its ability to deal with the fallout from the war in the Middle East.

“The impact is assessed to be not material at the group level,” said chief executive officer Vincent Chong at the group’s annual general meeting (AGM) on Thursday (Apr 23).

Speaking to more than 500 shareholders at the Sands Expo and Convention Centre, he revealed that less than 3 per cent of ST Engineering’s revenue in FY2025 came from the Middle East.

The conflict, which began on Feb 28 and is currently on an indefinite ceasefire, has traffic through the Strait of Hormuz grounded to a near standstill.

But ST Engineering’s management emphasised that the group is well protected from the impact of the war.

Most of its electricity usage is passed through to customers. Chong said that half of the amount that is not passed through is hedged.

Adjustment factors that will reflect the cost of inflation are also negotiated into ST Engineering’s contracts.

Nonetheless, Chong remains wary of the indirect effects of the conflict, such as increased inflationary pressures, economic downturns, further supply-chain disruptions and effects on global air travel.

Cedric Foo, chief financial officer at ST Engineering, said that while supply-chain disruptions have resulted in higher prices across the board, the group is not competitively disadvantaged.

“So long as you are not disadvantaged against your competition, you can still hold your market share, even if you raise prices.”

Satcom business in the spotlight

Both shareholders and the Securities Investors Association (Singapore) or Sias raised concerns about the group’s satellite communication (satcom) business, following the S$689 million impairment tied largely to ST Engineering’s satcom unit, iDirect.

The impairment largely weighed down the group’s net profit in the second half of FY2025, leading to an 83.6 per cent slump in net profit to S$59.9 million.

The urban solutions and satcom segment sank into the red with a S$567.7 million loss in H2, reversing from earnings of S$31.1 million a year earlier.

Despite a challenging operational environment and strong competition, ST Engineering’s management remains positive on the group’s satcom business.

“Satcom was a challenging business, and it still is,” said Chong, noting competition from established players such as SpaceX and Amazon.

The group is also optimistic on long-term industry prospects.

Chong noted that there is a “good chance” that the satcom unit will achieve year-on-year revenue growth in the first quarter of 2026, citing orders in key markets such as Europe and Saudi Arabia.

The unit has also made “good progress” in cost reduction, with planned initiatives aimed at delivering S$20 million annualised savings, targeted to be achieved by Q2 FY2026.

However, Chong does not rule out strategic actions for iDirect. This includes divestments, mergers and “various other strategic opportunities”.

“There is no assurance that any strategic options or transactions will take place, but we will always evaluate. Meanwhile, turning around the business is a ‘no-regret’ move,” he said.

Twelve resolutions were passed at Thursday’s AGM, including one to re-elect Chong as a director on ST Engineering’s board.

Shares of ST Engineering closed 2 per cent or S$0.22 lower at S$11.03 on Thursday.