- Singapore stepped up defence and security spending by 12% and 17% in FY21 and FY22, respectively. This is expected to rise further, fuelled by heightened geopolitical tensions and cybersecurity threats, providing revenue visibility for STE. Total contracts won for defence and security amounted to S$5.2bn in 1H23, 20.9% higher than the whole of FY22.
- Recovery in air travel will underpin demand for aerospace MRO and components. According to IATA, air passenger-km is still 9.7% below pre-Covid. Asia Pacific’s volume is still 20.3% below, and playing catch-up.
- TransCore’s acquisition is on track to be earnings accretive from 2H23e, we believe, leading to a positive FY23e EBIT for the urban solutions and Satcom division.
- We initiate coverage with a BUY recommendation and discounted cash flow TP of S$4.50.