“In an era of unpredictable geopolitics, global defence spending is on the rise. Historically, global defense spending has averaged 4.5% of GDP pre 1990 and 2.4% since then,” Guha and Seet write in their March 14 report.
“Since 2021, Europe, Middle East and North Africa and Japan have contributed to the growth of military expenditure with increases ranging from 0.4 percentage points to 1 percentage point of their GDP. Singapore is also stepping up defence spending with 2.9% of GDP, or 18.1% of government expenditure, earmarked for defense in the FY2026 budget,” they add.
“Commentary suggests the Singapore government is prepared to spend more than the usual 3% of GDP on defense if the need arises. Improving the ability to deploy, counter and operate alongside unmanned systems (e.g. drones) received special mention in the latest budget, along with strengthening Singapore’s cybersecurity capabilities,” they continue.
To this end, Guha has upgraded his call on ST Engineering to “buy” with a higher target price of $12.50, as the group’s order book stood 16% higher y-o-y to $33.2 billion as at end-December 2025. The order book lift comes on the back of a 49% growth in new contract wins of $18.7 billion. Of the figure, half come from the defence and public security business; international defence sales in Europe and Middle East doubled on the year, the analyst notes. Guha has a previous “hold” rating on the stock with a target price of $9.50 before.
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To Seet, Addvalue Technologies is one of the “rare profitable, high margin and growth stocks in both the space and drone industries and a turnaround story”.
The company increased its customer base to over 20 clients as of 2025, growing from four to five clients some seven to eight years ago.
“[The] pace and size of orders has surged, backed by the increased sectoral activity, and it currently has a record US$26 million ($33.3 million) backlog,” Seet writes.
In addition to his upgrade, Guha has increased his earnings estimates for ST Engineering by 0.5%, 2.6% and 2.5% for FY2026, FY2027 and FY2028 respectively as he expects higher revenue from the group’s defence and commercial aerospace business.
His new target price implies a blended FY2027/FY2028 multiple of 32 times, backed by a 15% patmi compound annual growth rate (CAGR) from FY2025 to FY2028.
Addvalue remains Seet’s top pick within the small- and mid-cap segment. The analyst has maintained his “buy” call and target price of 12 cents, which is based on an FY2027/FY2028 P/E blended multiple of 35 times. Seet’s figure is backed by a patmi CAGR of 86% from FY2025 to FY2028.
At the mid-day break, ST Engineering shares rose 10 cents or 0.92%, to $10.98, while Addvalue Tech shares were unchanged at 8.1 cents.
