Billion Dollar Club: CHEMICALS + INDUSTRIAL GOODS + UTILITIES

Singapore Technologies Engineering (ST Engineering), a regular winner at the Billion Dollar Club (BDC), is the overall winner of the Chemicals + Industrial Goods + Utilities industry sector. In addition, the company is named winner for the growth in profit after tax (PAT) and weighted return on equity (ROE) categories too. Yangzijiang Shipbuilding (Holdings), with its win for returns to shareholders, prevented the former from making a clean sweep.

For the three years under consideration for this year’s BDC, ST Engineering managed to achieve a profit after tax growth of 4%, as well as weighted ROE of 23.6%. Yangzijiang Shipbuilding, meanwhile, generated 48.5% in shareholder returns, making it the top performer by this metric among all BDC companies and not just this sector.

For FY2023, ST Engineering managed to drive its revenue above the milestone mark of $10 billion for the first time, along with records in metrics such as ebitda, ebit and net profit reaching new levels.

A key driver for the company’s better performance came from the recovery of the aviation industry following the pandemic, which naturally led to a bigger volume of MRO (maintenance, repair and overhaul) work done by the company. Its urban solutions unit enjoyed a growing number of contracts to provide traffic management systems too, further justifying the US$2.7 billion ($3.57 billion) acquisition of US-based Transcore back in 202x.

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Better numbers can be seen. ST Engineering, following a significant internal restructuring of its operating units, now sits on a record order book of more than $27 billion as at the end of FY2023 ended December.

In a sense, the record numbers are the result of the company’s new strategic focus. Under a five-year plan to 2026, ST Engineering aims to strengthen its core business while pursuing growth in its international defence business and newer growth areas such as smart city verticals.

Under current chairman Teo Ming Kian, the company is placing a stronger emphasis on translating its research and technological capabilities into commercial applications. The company changed the name of its Research, Development and Technology (RD&T) board committee to Research, Innovation, Technology and Enterprise (RITE) committee. “Our goal is to translate our research and innovation into practical applications, bringing them to market expeditiously. This approach ensures that we provide our customers with the most cost-effective solutions, distinguishing us in a way that they might not readily find elsewhere,” says Teo in the company’s annual report.

Similar to ST Engineering, Yangzijiang Shipbuilding is another company within this sector that is sitting high on a record order book. The China-based, but Singapore-listed company is one of the leading shipbuilders in the country. As at end of 2023, it has achieved an order book of some US$14.5 billion to build 182 vessels.

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In a sign of how Yangzijiang Shipbuilding is trying to capture new trends, it has a growing proportion of orders to build new ships that run on greener fuel such as methanol, as part of the increasing awareness towards sustainability among the maritime industry.

The company’s share price gain in recent years was soundly backed by its rising earnings. For the most recent FY2023 ended December 2023, Yangzijiang Shipbuilding reported earnings of RMB4.1 billion ($761 million), up 57% y-o-y; revenue increased by 16.5% in the same period to RMB16.1 billion.

Ren Letian, the company’s executive chairman and CEO says he is pleased with another record-breaking year. “Our efforts in enhancing shipyard operational efficiencies and technical capabilities have proven to be a success. This has enabled us to improve our overall mix of products, producing vessels with a higher premium as evident during the period under review,” he adds.