Can ST Engineering aspire to challenge DBS to be king of the local bourse?

[SINGAPORE] Unsurprisingly, Singapore’s largest group by market capitalisation is a bank – DBS . Having a strong shareholder in Singapore-headquartered global investment company Temasek helps drive DBS’ success.

Perhaps, more importantly, the lender’s success is helped by being in the fast-growing financial services sector and headquartered in Singapore, which is growing strongly as a financial hub. Think of wealth inflows to the Republic because of its safe-haven status in a tumultuous world, among others.

Led by a capable management team, DBS’ leading position on the local bourse could plausibly go unchallenged for many years.

However, could megatrends drive a non-financial services group to challenge DBS for supremacy on the Singapore Exchange? 

A dark horse for the title of king of the local bourse might one day be another Temasek-linked company: ST Engineering .

In the year to date, ST Engineering’s share price has made stronger gains than DBS’. Between end-2025 and Tuesday (Jun 16), the former’s share price rose 28 per cent, and the latter’s, by 13 per cent.

Nonetheless, ST Engineering is way smaller than DBS – its market capitalisation is less than a fifth of DBS’.

In 2025, ST Engineering’s net profit was S$463 million. After various adjustments, the group’s net profit on a base operating performance basis was S$851 million. Both these numbers pale in comparison to DBS’ net profit for 2025 of around S$11 billion.

However, exciting times might lie ahead for ST Engineering as the group could grow profit strongly and be richly rewarded by investors. 

Defence spending

The key drivers for a super bull case for ST Engineering are strong growth in defence spending at home and abroad, and Singapore’s unique strengths in the defence sector.

While ST Engineering has diverse business interests, the defence and public security segment is arguably its key driver, segment-wise. This segment might excite investors most as the risks of military conflicts rise and the importance of technology in modern warfare becomes, segment-wise, increasingly apparent. 

In 2025, revenue contribution from the defence and public security, commercial aerospace, and urban solutions and satellite communications (satcom) segments were S$5 billion, S$5.3 billion and S$2 billion, respectively.

Meanwhile, reported earnings before interest and tax in 2025 from defence and public security, commercial aerospace, and urban solutions and satcom were S$919 million, S$542 million and negative S$556 million, respectively.

In the first quarter, the defence and public security segment was the top revenue contributor at S$1.4 billion, followed by commercial aerospace at S$1.3 billion, and urban solutions and satcom at S$525 million. 

Contract wins for the defence and public security segment in Q1 amounted to about S$2.4 billion – roughly equal to the combined contract wins from the commercial aerospace and urban solutions and satcom segments. 

Singapore consistently spends heavily on defence. In financial year 2026, the estimated total expenditure among all ministries and organs of state was the highest for the Ministry of Defence, at S$25.8 billion.

Facing an increasingly hostile geopolitical environment, Singapore could possibly spend ever-growing sums to upgrade and maintain its defence capabilities.  

ST Engineering’s capabilities in defence and public security span land, sea, air and cyberspace. 

The group is a strategic partner of the Singapore Armed Forces’ modernisation efforts. It is investing in the integration of emerging technologies such as artificial intelligence to deliver best-in-class solutions.

ST Engineering is eyeing major international defence opportunities in land platforms, naval platforms, munitions and weapons systems, as well as digital systems and the cyber arena.

The group has a proven track record and diverse international customers.

The Republic’s principles-based diplomacy and extensive cultivation of ties with many countries in areas including defence can position Singapore businesses to be suitable partners, as nations look to beef up defence capabilities in a more hostile world. 

In short, ST Engineering can seize huge opportunities from rising defence spending at home and abroad.

Stock investors like exposure to companies in sectors driven by megatrends. Should ST Engineering execute well in capturing burgeoning defence opportunities, expect investors to view the company’s stock highly favourably.

Moreover, as Singapore works to actively contribute to the global space ecosystem, could ST Engineering play a key role in this journey?  

Of course, while being in the right space helps greatly, ST Engineering might need to scale up its defence and other business lines rapidly. Pursuing inorganic growth can be challenging – buying foreign defence businesses will be tricky, given national security sensitivities.

In addition, aggressive expansion brings risks to the balance sheet, corporate culture and so forth. 

Still, ST Engineering can count on Singapore producing high-quality talent in engineering as well as artificial intelligence, and can possibly be brave about investing for growth, given its Temasek backing.

A vibrant local bourse

Increasingly, the performance of many equities markets are largely led by one or a small handful of companies.

As investor interest in the local bourse continues, as hoped, to rise, having companies beyond the local banking trio of DBS, OCBC and UOB grow quickly will expand investors’ choice. 

Maybe Singtel can be an AI champion. Or Keppel can lead in the green transition. 

Possibly, the Singapore Airlines Group has much room to grow as tourism continues to expand in Asia and elsewhere, while the city-state strengthens its position in commercial aviation.

Doubtless, DBS’ management will continue working assiduously to grow the bank from a high base and a position of strength. A successful DBS brings pride to Singaporeans and contributes to a vibrant local bourse.

Still, may other companies aim high and target supplanting DBS. As the animal spirits of investors are typically most stirred by good growth stories, efforts to make the local bourse more vibrant will only truly succeed if there are more great businesses on the local exchange.

Investors, the local bourse and Singapore will all win if the likes of ST Engineering can up their game and start challenging DBS’ leadership in the Singapore bourse in the coming years. 

The writer owns shares in ST Engineering