Companies Analysed: Singapore Airlines (SGX: C6L) | Keppel Ltd (SGX: BN4) | ST Engineering (SGX: S63)
Exchange: Singapore Exchange (SGX) | Index: Straits Times Index (STI)
Report Date: February 2026
Classification: Equity Research — Long-Term Investment Analysis
Executive Summary
This case study examines three of Singapore’s most prominent blue-chip stocks — Singapore Airlines (SIA), Keppel Ltd, and ST Engineering — across four critical dimensions: growth trajectory, forward-looking outlook, strategic solutions to structural challenges, and broader market impact. All three companies are constituents of the Straits Times Index (STI), Singapore’s benchmark equity index, and have posted share price appreciation to multi-year or all-time highs entering 2026.
The central analytical tension this report addresses is whether the recent rally across these blue-chips reflects durable fundamentals or cyclical mean-reversion. Our conclusion is that the three companies occupy distinct positions on the cyclical-to-structural spectrum: SIA remains the most exposed to exogenous shocks and industry cycles; Keppel occupies an intermediate position, undergoing a deliberate strategic pivot toward asset-light, recurring-fee businesses; and ST Engineering presents the most defensible earnings profile, underpinned by a record-high order book and diversified global revenue streams.
Section 1: Growth Analysis
1.1 Comparative Performance Against the STI
Over the 12 months preceding February 2026, all three companies have meaningfully outpaced the broader Straits Times Index. Keppel led the cohort with share price returns of approximately 56%, driven by sustained positive sentiment around its asset management pivot and record infrastructure earnings. ST Engineering and SIA also posted strong gains, both trading near or at 52-week highs as of mid-February 2026.
Company Ticker 52-Wk High Mkt Cap (S$B) P/E (TTM) Div. Yield Key Growth Driver
Singapore Airlines C6L S$7.63 ~S$21B ~9–11x 5.4% Travel recovery / Air India-Vistara
Keppel Ltd BN4 S$12.69 ~S$18B ~14–16x ~3.5% Asset mgmt / Data centres
ST Engineering S63 S$10.20 ~S$16B ~22–24x ~2.8% Defence & Aerospace order book
Table 1: Comparative blue-chip valuation snapshot, February 2026. Sources: SGX, company filings.
1.2 Singapore Airlines — Cyclical Recovery Growth
SIA’s growth story in FY2024/2025 was significantly amplified by a non-recurring gain arising from the Air India-Vistara transaction, which inflated net profit to S$2.78 billion. Stripping out this one-off, normalised half-year (1HFY2025/2026) profit stood at S$239 million — a dramatic reset that underscores the importance of distinguishing headline from core earnings. The airline’s operating margin has compressed to approximately 8.3%, reflecting the broader industry-wide normalisation as the post-pandemic capacity boom cools and passenger yield premiums moderate.
SIA’s balance sheet remains resilient, with approximately S$6.5 billion in cash against S$10.9 billion in total debt. The net leverage position is manageable but elevated relative to pre-COVID levels, reflecting the capital intensity of fleet renewal and route expansion. The trailing dividend yield of 5.4% is a function of elevated prior-year earnings and may face pressure if core profitability does not recover to post-normalisation norms.
1.3 Keppel Ltd — Structural Transformation Growth
Keppel’s growth profile is the most complex of the three, reflecting an organisation mid-transformation. Full-year 2025 net profit surged 39% year-on-year to S$1.1 billion, with improvements across all business segments and record earnings from the Infrastructure Division. However, profit attributable to shareholders fell 16.1% to S$789 million, dragged by a S$222 million accounting loss from the proposed divestment of M1’s telecommunications business — a necessary but dilutive restructuring step.
Since October 2020, Keppel has monetised S$14 billion in assets. Funds under management (FUM) reached S$91 billion by mid-2025, with management targeting S$100 billion by end-2026 and S$200 billion by 2030. Group revenue rose 3.4% year-on-year to nearly S$6 billion. The deal flow pipeline stands at approximately S$33 billion across its three divisions — Infrastructure, Real Estate, and Connectivity — providing forward earnings visibility.
1.4 ST Engineering — Defensive Compounding Growth
ST Engineering offers the most consistent growth trajectory of the three. Nine-month 2025 (9M2025) revenue grew 9% year-on-year to S$9.1 billion, with broad-based strength across Commercial Aerospace and Defence & Public Security segments. The group’s order book as of 30 September 2025 reached a record S$32.6 billion, representing approximately 2.7 times annualised revenue — an exceptional level of forward revenue coverage that provides substantial earnings predictability.
ST Engineering has also demonstrated capital discipline, generating S$594 million in cash proceeds from successful divestments, which partially funded a special dividend of S$0.05 per share on top of the ordinary full-year dividend of S$0.18 per share.
Section 2: Forward Outlook
2.1 Macro Environment
The macroeconomic environment entering 2026 presents a mixed backdrop for Singapore’s blue-chip industrials. On the positive side, global air travel demand continues to recover toward and beyond pre-pandemic levels; defence budgets across NATO and Asia-Pacific are expanding in response to persistent geopolitical tensions; and institutional capital continues to flow into real assets and infrastructure, supporting Keppel’s asset management ambitions.
Headwinds include elevated interest rates — which increase the cost of capital for asset-heavy businesses like SIA and Keppel — currency volatility across the SGD, USD, and EUR (relevant to all three given their international revenue exposures), and moderating passenger yields as global aviation capacity normalises. Supply chain disruptions in aerospace manufacturing also pose timing risks for ST Engineering’s delivery schedules.
2.2 Singapore Airlines — Outlook
The medium-term outlook for SIA is cautiously constructive. The strategic rationale for the Air India-Vistara combination is sound, providing SIA with meaningful exposure to the world’s fastest-growing aviation market. However, the integration is complex, and the financial contribution from this partnership will take several years to fully materialise in SIA’s consolidated accounts.
Passenger yields — the revenue earned per passenger kilometre — are the single most important variable to monitor. If capacity additions outpace demand recovery (as occurred in 2023–2024), yields compress and operating margins contract sharply. SIA’s cargo division, which was a key profit driver during the pandemic, has reverted to pre-COVID contribution levels, removing a significant earnings buffer. Investors should view SIA as offering a 3–5 year recovery thesis with meaningful downside risk if a global economic slowdown suppresses travel demand.
2.3 Keppel Ltd — Outlook
Keppel’s outlook hinges on its ability to execute the transition to a fee-based asset management model at scale. The S$200 billion FUM target by 2030 implies a compound annual growth rate of roughly 22% from the current S$91 billion base — ambitious but not implausible given the structural tailwinds in global infrastructure, energy transition, and data centre investment.
The proposed divestment of M1’s telco business, while causing a short-term accounting drag, is strategically coherent — it simplifies the group’s portfolio and reduces capital intensity. The energy transition pipeline and data centre buildout represent genuine secular growth opportunities. Net gearing of 0.82x as of December 2025 remains elevated, and the group’s ability to recycle capital from asset divestments into higher-returning management mandates will be the key execution metric.
2.4 ST Engineering — Outlook
ST Engineering’s forward visibility is the strongest of the three. The S$32.6 billion order book provides a contractual revenue runway that extends several years. Defence spending tailwinds are structural, not cyclical — geopolitical realignment in Asia-Pacific is driving sustained government procurement across land systems, cybersecurity, and public security infrastructure.
The updated dividend policy — distributing one-third of incremental net profit growth from FY2026 onwards — represents a credible shareholder return commitment that grows proportionally with earnings. Aerospace MRO (maintenance, repair and overhaul) demand is also expected to remain robust as the global aircraft fleet ages and air traffic volumes normalise. The principal risk is execution bandwidth: managing a S$32.6 billion order book across multiple geographies and disciplines requires disciplined project management and talent retention.
Section 3: Strategic Solutions to Key Challenges
3.1 Singapore Airlines — Solutions
Challenge: Earnings Cyclicality and Fuel Price Exposure
SIA’s core profitability is disproportionately sensitive to fuel prices (jet fuel typically represents 25–30% of airline operating costs) and exogenous demand shocks such as pandemics, geopolitical conflicts, or economic recessions. The normalisation of FY2025/2026 earnings following the one-off Vistara gain highlights the structural limitations of the airline business model.
Recommended solutions:
Accelerate hedging programme diversification: SIA should extend its fuel hedging horizon and explore structured derivative instruments that provide downside protection without fully sacrificing upside participation in a declining oil environment.
Monetise non-airline assets: SIA Engineering, SIAEC, and SIA Cargo represent embedded asset value that could be partially monetised through selective listings or strategic partnerships, reducing earnings concentration in the passenger segment.
Deepen the India exposure via Vistara synergies: The Air India partnership should be leveraged to capture cargo flows, maintenance volumes, and codeshare traffic that would not otherwise accrue to SIA, converting a one-off gain into a recurring strategic advantage.
Manage capacity discipline: SIA must resist the temptation to aggressively expand capacity in response to short-term demand spikes. Capacity discipline is the most effective yield management tool available to premium carriers.
3.2 Keppel Ltd — Solutions
Challenge: Transition Execution Risk and Gearing
Keppel’s transformation from a capital-intensive conglomerate to an asset-light fund manager is strategically sound but operationally complex. The simultaneous management of legacy asset divestments, new fund formation, large infrastructure projects, and the M1 telco disposal creates meaningful execution risk. Net gearing of 0.82x remains a constraint on financial flexibility.
Recommended solutions:
Prioritise FUM quality over quantity: The path from S$91 billion to S$200 billion FUM is more sustainable if achieved through large-ticket mandates in institutional infrastructure and energy transition funds rather than fragmented retail vehicles. Quality mandates attract co-investment and generate higher fee margins.
Accelerate M1 divestment completion: The accounting drag from the M1 disposal should be resolved as expeditiously as possible to present a cleaner earnings profile to investors and reduce management distraction.
Maintain distribution consistency: The S$0.47 per share distribution for FY2025, including a special component in both cash and REIT units, is innovative but the REIT unit component may not be valued equivalently by all shareholders. Keppel should assess whether a higher cash component would better support the share price.
Develop a data centre-specific fund structure: Given institutional capital’s appetite for digital infrastructure exposure, a dedicated data centre fund anchored by Keppel’s existing assets could unlock significant FUM growth and crystallise embedded NAV.
3.3 ST Engineering — Solutions
Challenge: Order Book Execution and Talent Scarcity
ST Engineering’s primary challenge is not demand — the S$32.6 billion order book ensures revenue visibility — but supply-side execution: specifically, the ability to deliver complex defence and aerospace projects on time and within budget, in an environment of acute skilled labour scarcity and aerospace supply chain bottlenecks.
Recommended solutions:
Invest in digital manufacturing and MRO automation: The deployment of robotics, digital twins, and AI-assisted inspection systems in MRO operations can partially offset labour cost inflation and improve throughput consistency, directly protecting operating margins.
Expand the talent pipeline through strategic partnerships: Formal partnerships with polytechnics, universities, and defence academies in Singapore and key international markets (US, Europe) should be deepened to ensure a sustainable supply of aerospace engineers and systems integrators.
Hedging of USD revenue: A significant proportion of ST Engineering’s defence and aerospace revenue is denominated in USD. With the SGD/USD rate subject to meaningful volatility, a disciplined natural hedging strategy (matching USD costs against USD revenues) supplemented by financial hedging is essential to protect reported earnings.
Selective geographic expansion: ST Engineering should continue to pursue US market penetration — where defence budget expansion is structural — while managing country concentration risk through diversified customer relationships across NATO allies and Asia-Pacific partners.
Section 4: Investment Impact & Portfolio Implications
4.1 Impact on the STI and Singapore Market
As STI constituents with combined market capitalisation exceeding S$55 billion, the performance of SIA, Keppel, and ST Engineering has a material impact on Singapore’s broader equity market. Their collective rally to multi-year highs has contributed meaningfully to STI index performance and has attracted renewed interest from regional and global institutional investors in Singapore equities — a market historically underweighted by global fund managers relative to its economic fundamentals.
The three companies also serve as proxy indicators for distinct aspects of Singapore’s economic strategy: SIA for the city-state’s role as a global aviation hub; Keppel for its ambition to become a regional infrastructure and real asset capital-recycling platform; and ST Engineering for the defence-industrial complex and aerospace MRO cluster that Singapore has deliberately built as a sovereign economic moat.
4.2 Dividend Impact and Income Investor Implications
For income-oriented investors — a substantial segment of Singapore’s retail investor base — the dividend trajectories of the three companies are critical. SIA’s 5.4% trailing yield is the most attractive but carries the highest sustainability risk given earnings normalisation. Keppel’s proposed 38% year-on-year increase in total distribution signals confidence in free cash flow generation but includes a non-cash REIT unit component that complicates yield calculations. ST Engineering’s new policy of distributing one-third of incremental profit growth is the most institutionally credible structure, as it directly links shareholder returns to earnings momentum.
4.3 ESG and Structural Megatrend Impact
All three companies have increasing exposure to structural ESG-aligned megatrends. Keppel’s energy transition infrastructure and data centre investments align directly with the global decarbonisation agenda. ST Engineering’s smart city and public security solutions address urbanisation and digital infrastructure needs in growing Asian economies. Even SIA’s fleet renewal programme — transitioning to more fuel-efficient Airbus A350 and Boeing 787 Dreamliner aircraft — reduces the airline’s per-passenger carbon intensity, a metric increasingly scrutinised by institutional investors subject to ESG mandates.
Investors with ESG-oriented mandates should be aware that SIA carries the highest absolute carbon footprint of the three, while Keppel’s legacy offshore and marine heritage, though substantially divested, may still appear in backward-looking ESG screening databases. ST Engineering’s defence business, while a stable earnings anchor, may be excluded from certain socially responsible investment (SRI) screens that restrict weapons and defence sector exposure.
4.4 Risk-Adjusted Return Framework
From a portfolio construction perspective, the three companies serve distinct roles:
Company Portfolio Role Risk Level Return Driver Investor Profile
Singapore Airlines Cyclical recovery play High Travel volume & yield recovery Growth-oriented, higher risk tolerance
Keppel Ltd Transformational growth Medium-High FUM growth & asset recycling Balanced, long-term horizon
ST Engineering Defensive compounder Low-Medium Order book execution & dividends Income & quality-focused
Table 2: Risk-adjusted portfolio role framework for the three blue-chips.
Conclusion
Singapore’s blue-chip universe offers investors genuine optionality across the risk-return spectrum. The three companies examined in this case study are not interchangeable — they represent fundamentally different business models, earnings qualities, and risk exposures. Selecting among them should be a function of portfolio objectives, time horizon, and risk appetite rather than recent share price momentum.
SIA offers the most compelling upside if the Air India partnership delivers on its long-term promise and global travel demand remains resilient. But its earnings are inherently volatile and its dividend sustainability is conditional on operating cash flow recovery. Investors who buy SIA today are making an implicit bet on the global travel cycle and SIA’s execution of a complex international partnership.
Keppel is the highest-conviction structural transformation story in Singapore’s large-cap universe. The pivot from capital-intensive conglomerate to asset-light fund manager is the right strategic direction, and the S$33 billion deal flow pipeline suggests the management team is executing. However, the transition period carries meaningful earnings volatility, and the 2030 FUM target requires sustained discipline over a multi-year execution horizon.
ST Engineering remains the most compelling choice for investors who prioritise earnings predictability and dividend reliability over transformational upside. The S$32.6 billion order book is a genuinely rare asset in Singapore’s equity market — a multi-year contractual revenue guarantee that substantially de-risks the investment thesis. The premium valuation multiple (22–24x trailing P/E) is justified by this quality of earnings, though it leaves limited margin of safety in a valuation compression scenario.
The key analytical discipline for investors across all three names is to resist conflating rising share prices with improving investment merit. All three stocks have rerated substantially. The question is not whether they have performed well — they have — but whether the future earnings growth embedded in current prices is likely to materialise. On that basis, ST Engineering and Keppel (over a 3–5 year horizon) offer the most sustainable investment cases, while SIA requires a higher risk tolerance and a more active monitoring commitment.
Disclaimer
This case study is prepared for educational and analytical purposes only. It does not constitute financial advice, investment recommendations, or an offer to buy or sell any securities. All data is sourced from publicly available company filings, SGX disclosures, and press releases as of February 2026. Investors should conduct their own due diligence and consult a qualified financial adviser before making investment decisions.