By contrast, Singapore Technologies Engineering (ST Engineering) has been offloading what it sees as non-core, as it looks to raise funds to pay down the debt from its US$2.7 billion acquisition of US transport systems firm TransCore in March 2022, and to invest in new growth areas such as artificial intelligence (AI).
On Sept 1, the two companies entered into yet another deal along these respective directions and with each other. ST Engineering sold its 46.5% stake in the CityCab joint venture to ComfortDelGro for $116.3 million.
For ST Engineering, the consideration, which was paid in cash, translates to an enterprise value/ebitda multiple of 5.5 times based on CityCab’s last 12 months unaudited ebitda for the period ended May 31. The divestment will result in a one-off gain on disposal of about $77.2 million for its current financial year.
Vincent Chong has been group president and CEO since 2016 and has completed 16 divestments as at March this year. Since then, ST Engineering has divested at least two more ventures, excluding CityCab. “We assess our portfolio continually, based on their financial performance historically, and then we assess them based on their financial performance or projections going forward, whether they are in a growth industry or not. We also look at whether we need its strategic capabilities and whether they are worth more to a different owner than to us,” said Chong in an interview with The Edge Singapore in March.
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In June, the company announced the sale of its US-based construction equipment unit, LeeBoy, for US$290 million ($371 million). The net proceeds of some US$246 million will be used to pay down debt, saving interest costs of some US$9 million a year. The buyer is the French company Fayat Group, which is paying an enterprise value of 9.3 times LeeBoy’s ebitda. This deal was completed on Sept 4.
Less than a month later, on July 17, ST Engineering announced the sale of SPTel, a broadband joint venture with Singapore Power, for an enterprise value of $290 million. For its 51% stake, ST Engineering expects to book a one-off gain of around $80 million based on its carrying value for SPTel of around $65 million. This deal is expected to close in the fourth quarter of 2025.
In recent years, investors here have taken a liking to divestment stories, which are often pitched as part of an overall active capital management strategy. Companies with a sprawling portfolio of legacy assets and subsidiaries, such as CapitaLand, Keppel and Singapore Telecommunications, have made active asset monetisations part of their pitch to investors. ST Engineering, with its multi-prong growth story clearly articulated, seems to have joined this trend in its own way, winning investors’ favour and making this stock the best-performing Straits Times Index (STI) component this year with a gain of 76.56% year to date.
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On its own, the recent divestment of CityCab is unlikely to move the needle significantly. RHB Bank Singapore’s Shekhar Jaiswal estimates that ST Engineering is likely to lower interest costs of $2 million this year and $4 million a year from FY2026 onwards, a level deemed “immaterial”. For now, he is keeping his “buy” call with an unchanged target price of $9.10.
Defence, AI
One reason ST Engineering is enjoying strong growth this year is the broader bullish sentiment among investors towards the global defence sector. In the most recent 2QFY2025 alone, it won $1.5 billion worth of related contracts. These include wins to build a fleet of unmanned surface vessels and autonomous underwater vehicles used to counter mines, 40mm and 155 mm ammunition, as well as aircraft maintenance contracts for a North African air force.
Meanwhile, the digital business, covering AI, cloud and cyber solutions, secured contracts to roll out high-performance GPU infrastructure and data centre services, as well as training and simulation, along with the development and integration of AI-enabled command and control systems. Other wins include advanced encryption products and cloud-based managed security services for a customer in Asia.
As an adjacent domain to AI, the company is also boosting its cybersecurity offerings. On July 4, ST Engineering unveiled the AI-enabled threat elimination and response (AETHER) service, a subscription-based service aimed at providing SMEs with what is termed “comprehensive protection” from cyber risks. Priced at just $100 per endpoint, AETHER works in three stages: helping users identify, monitor and then prepare for oncoming security threats.
More recently, on Sept 4, ST Engineering announced a five-year, $250 million AI Research Translation programme for so-called “physical AI”, which refers to a branch of AI that enables machines to perceive, understand and interact with the physical by directly processing data from a variety of sensors.
This phased programme will advance robotics, swarm and humanoid solutions to address complex operational challenges, with a focus on supporting humanitarian situations. At the heart of the initiative is the Manned-Unmanned Teaming Operating System (MUMTOS), which serves as the “brain” of human-machine collaboration.
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ST Engineering says the system can assess life-risk scores by measuring oxygen levels, structural stability and the number of people detected to prioritise rescue efforts. In real-life scenarios, MUMTOS helps first responders reach those in need quickly, while alerting hospitals and coordinating ambulance dispatch.
Lee Shiang Long, group chief technology and digital officer, says users can start to imagine themselves working with a “swarm” of robots. “Why a swarm? Because when you have a few robots coming together, say, in a scenario of firefighting, you want some robots to sense what is going on, where is the fire, where are the people, where are the casualties? The robots will feed the information back to the command centre, where we can then respond with more robots or a human team,” he says. To turn such scenarios into reality, ST Engineering is spending $250 million to either train or hire engineers and AI specialists.
The group’s deeper move into the cyber and AI space is sharpened by its new chief of the defence and public security unit, Mervyn Tan, a former air force chief who was most recently managing director of investment at venture capital firm Vertex Holdings, known for its series of investments in deep-tech ventures such as data security company Cyberhaven.
Still, the rise in global spending on defence will continue to anchor the group’s earnings in the years ahead. “We are very confident that what we saw as an increase in defence investment by partners, especially in Europe, is something that we assess to be structural in nature, and it is unlikely to weigh whether the wars or peace deal and war stopped in the medium-term,” says Tan at the company’s 1HFY2025 result briefing.
He adds: “I think our networks and our relationships with customers, both local as well as overseas, are very strong, and that speaks to my point, our strategy to leverage on our partners’ policies to get to markets where our partners are more familiar with. This, added with our technologies, I think makes a strong winning formula.”
ComfortDelGro draws bigger turf in point-to-point business
Since 2025, ComfortDelGro (CDG) has managed CityCab as part of its local taxi business. In its announcement of the acquisition, CDG said that having full ownership will “strengthen the group’s core point-to-point business in Singapore and allow the group to integrate better and shape its global point-to-point business, adapting to market demands and boosting profit contribution”.
The acquisition “reinforces” CDG’s “confidence in point-to-point mobility as a key transportation solution”.
Jacquelyn Yow of CGS International notes that ST Engineering’s share of CityCab’s net profit for the FY2024 was $8.7 million, which translates into a price-to-earnings ratio of 13 times. She writes: “We deem the deal valuation as fair as CDG is currently trading at about 14 times FY2025 P/E.”
Based on the estimates of Eric Ong of Maybank Securities, CDG will see about four months of contribution in FY2025 from its additional stake in CityCab.
Meanwhile, DBS Group Research’s Chee Zheng Feng feels the transaction may bring about near-term share price softness given the “optics of investing in a shrinking business”, even though CDG will be better positioned to execute its point-to-point (P2P) strategy more effectively in Singapore.
In the 1H2025, CityCab had an average of 2,030 cabs in its fleet, 9% lower than the 2,222 cabs in the 1H2024. “Coupled with readthrough from CDG’s softer 1HFY2025 [ended June 30] Singapore taxi earnings due to the smaller fleet, suggest profitability could be lower this year,” Chee writes in his Sept 1 report.
While Chee expects the transaction to be “minorly” earnings-accretive for CDG’s FY2025 results at about $1.1 million or 0.5% of CDG’s full-year bottom line, the group will need to “show execution and synergy delivery” over the next six to 12 months.
RHB Bank Singapore’s Shekhar Jaiswal is also “cautious” on the capital deployment merits of the transaction, given the structural challenges in the taxi industry, including a shrinking fleet size and intensifying competition from private-hire operators.
Like DBS’s Chee, Jaiswal believes the transaction will depend on CDG’s execution moving forward. “Assuming a 3.5% funding cost (which could ease in 2026) and factoring in ongoing earnings pressure in the taxi segment, we estimate the deal will add $1.2 million (+0.5%) to [CDG’s] FY2025 profit and $3.5 million (+1.0%-1.2%) in FY2026-FY2027. These have been incorporated into our forecasts,” he writes.
All four analysts have kept their “add” and “buy” calls on CDG with target prices of $1.80 for DBS, $1.70 for CGSI, $1.70 for Maybank and $1.75 for RHB.
