ST Engineering vs Sembcorp: Which Industrial Powerhouse Offers Better Value Now?

The Smart Investor01-09

Over the past five years, the quality blue-chip industrial companies Sembcorp Industries (SGX: U96) and ST Engineering (SGX: S63) have both done well for their investors. The former’s stock price ...

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Offers Better Value Now?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2026-01-09 17:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://thesmartinvestor.com.sg/st-engineering-vs-sembcorp-which-industrial-powerhouse-offers-better-value-now/><strong>The Smart Investor</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Over the past five years, the quality blue-chip industrial companies Sembcorp Industries (SGX: U96) and ST Engineering (SGX: S63) have both done well for their investors. \n\nThe former’s stock price ...</p>\n\n<a href=\"https://thesmartinvestor.com.sg/st-engineering-vs-sembcorp-which-industrial-powerhouse-offers-better-value-now/\">Source 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Engineering与胜科：哪家工业巨头现在提供更好的价值？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"U96.SI":1.95,"S63.SI":1.96},"content_text":"Over the past five years, the quality blue-chip industrial companies Sembcorp Industries (SGX: U96) and ST Engineering (SGX: S63) have both done well for their investors. \n\nThe former’s stock price has more than tripled, while the latter’s has more than doubled.\n\nConsidering fundamentals and valuation, which stock is a better buy now? \n\nBusiness Overview: Different Models, Different Strengths\nST Engineering – Steady Compounder \nA defence provider for Singapore, ST Engineering, or STE, has three business segments, namely, Commercial Aerospace (CA), Defence & Public Security (DPS), and Urban Solutions & Satcom (USS).\n\nThe non-discretionary nature of STE’s defence contracts, alongside essential maintenance, repair, and overhaul (MRO) activities for airlines, allows STE to earn consistent cash flows. \n\nOperating cash flow (OCF) has been positive in each of its last 10 completed financial years and averaged S$943 million, highlighting STE’s resilience in generating cash flows regardless of market conditions. \n\nThe company looks set to end 2025 with positive operating cash flow, given its S$761 million in operating cash flow for the first half of the year.      \n\nSembcorp Industries – Renewable Energy Player \nAs part of its 2023-2028 strategic plan, Sembcorp has been transitioning away from its fossil-fuel heavy past and towards renewable energy. \n\nThis is best seen in the company’s rapidly growing renewables energy portfolio, with a gross renewables capacity of 18.9 GW (13.8 GW installed, 5.1 GW under construction) in the first half of 2025, up from 14.4 GW (10.0 GW installed, 4.4 GW under construction) in the first half of 2024.\n\nSembcorp also completed the divestments of its non-core legacy coal assets in 2024, further amplifying its desire to cement its status as a renewable energy company. \n\nFinancial Comparison: Profitability, Cash Flow & Balance Sheet\nNow, let us compare both companies in terms of their financials.  \n\nST Engineering\nAs highlighted earlier, STE generates consistent cash flows because of the essential nature of its CA and DPS business segments. \n\nThis allows the company to pay a consistent annual dividend, a streak stretching back to at least 2015.  \n\nSTE’s gearing is on the higher side, with a debt-to-equity (D/E) ratio of 1.8. \n\nHowever, the blue-chip heavyweight’s ability to consistently generate solid cash flows makes this slightly higher leverage manageable. \n\nSembcorp\nSembcorp has a history of consistently producing positive OCF as well, averaging S$879 million over its last 10 completed financial years, highlighting the critical nature of its business as an energy provider. \n\nSimilar to STE, Sembcorp has returned these cash flows to shareholders in the form of consistent annual dividends, never missing a payment over the last decade. \n\nSembcorp has a slightly healthier balance sheet with a D/E ratio of 1.6, aided by proceeds from the sale of its SembEnviro business in March 2025. \n\nMoving forward, the company’s healthy cash flow generation ability should help in keeping its leverage manageable. \n\nComparison Angle:\nBoth companies rank similarly in terms of sustainability and consistency of cash flow generation, given the essential nature of their business operations. \n\nHowever, STE might edge out Sembcorp a little because of the disclosure of its order book, which gives considerable visibility on when revenue/cash flows are expected to be recognised by the company.STE is slightly more leveraged compared to Sembcorp, but it’s nothing to be overly worried about.\n\nGrowth Drivers: Where Will Future Returns Come From?\nST Engineering\nSTE’s future growth comes partially from the continued recovery we have seen in the aerospace market, which could lead to steady demand for the company’s MRO services. \n\nSTE’s order book of contracts provides the company with multi-year visibility in terms of revenue. \n\nThe continued trend of increased global defence spending could also result in more/higher-value defence contracts for STE. \n\nThe company has an order book of S$32.6 billion as of September 2025, up 21% from S$26.9 billion a year ago.\n\nThe USS segment’s international presence adds to STE’s overseas growth potential.\n\nSembcorp\nLooking ahead, Sembcorp’s growth drivers are tied to its aggressive expansion in the renewables space.\n\n\nSembcorp plans to have 25 GW of gross renewables capacity installed by 2028. The company is also pursuing international opportunities, as seen with its renewable capacity construction plans in China, India, and Southeast Asia.\n\nThe broader global trend of the energy transition from fossil fuels to renewable energy provides a structural growth tailwind for Sembcorp.\n\nComparison\nSTE’s future growth is more stable and defensive in nature, because of the resilient demand from CA and DPS, underpinned by a pipeline of contracts.\n\nSembcorp offers higher growth prospects with its sustainable energy charge, but it comes with potential higher volatility in operating performance – there was a dip in earnings in the first half of 2025.\n\nDividend Profile: Which Company Rewards Shareholders More?\nBoth companies pay consistent annual dividends to shareholders.\n\nHowever, Sembcorp boasts a higher trailing dividend yield of 4.3%, compared to STE’s 2.5%.\n\nRecently, Sembcorp’s dividends have seen an acceleration in growth. \n\nIts ordinary dividend per share had increased by 187.5% from S$0.08 in 2022 to S$0.23 in 2024, attributable to the increasing profitability experienced over the last few years.\n\nThe question for investors is: do you value stable yields?\n\nIf so, STE is your horse. \n\nBut, if you are looking at growth potential, Sembcorp might be for you.\n\nValuation: Which Stock Offers Better Value Today?\nSTE trades at an estimated forward price-to-earnings (P/E) ratio of 30.3, which is rich compared to the five-year average of 18.8.\n\nAlthough STE’s past execution has been stellar and the company also has decent future growth potential, the rich P/E ratio of 36.4 may mean its future growth has already been priced in.\n\nSembcorp trades at a lower estimated forward P/E ratio of 10.5; however, this is also above the five-year average of 7.9. \n\nWith the potential for relatively stronger growth ahead, alongside its steady ability to produce cash flow, Sembcorp’s current valuation looks rather attractive. \n\nRisk Factors Every Investor Should Note\nThe main risks for STE include potential cyclicality in the aerospace market, and its ability to execute its contracts and manage its costs.\n\nSembcorp’s risks lie in project execution, particularly for its markets in China, India, and Southeast Asia. \n\nTariffs related to renewables, as well as the inherent volatility in energy, could challenge Sembcorp. \n\nVerdict: Which Industrial Powerhouse Offers Better Value Now?\nSTE is ideal for conservative investors looking for predictable dividends and stable growth. \n\nFor investors looking for a slightly faster growth profile with exposure to renewable energy, Sembcorp might be more suitable for you. \n\nGet Smart: Match the Stock to Your Investment Goals\nUltimately, both companies are solid industrial choices. \n\nWhichever you choose to invest in depends on what you are looking for.\n\nSTE remains a premier ‘steady compounder’ for those seeking a defensive name that generates reliable income.Or, consider Sembcorp if you are comfortable with higher price volatility in exchange for exposure to its rapidly expanding global renewables portfolio.\n\nWhat if every stock trade in Singapore puts money in your pocket? One company earns whenever the market moves. Its free cash flow has grown close to 10% a year, and dividends are set to rise 40% over the next three years. Our free 2026 Dividend Playbook reveals this legal monopoly. Download it for free now.\n\nFollow us on Facebook, Instagram and Telegram for the latest investing news and analyses!\n\nDisclosure: Wilson.H does not own shares in any of the companies mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.36.0","shortVersion":"4.36.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2602290453","isCrawlerRequest":true}