SIA Engineering - OCBC Investment 2015-11-24: Proposed divestment to see net gain of S$186.8m

SIA Engineering - OCBC Investment 2015-11-24: Proposed divestment to see net gain of S$186.8m SIA ENGINEERING CO LTD S59.SI 

SIA Engineering Company: Proposed divestment to see net gain of S$186.8m 

  • SIA Engineering Company Ltd (SIAEC), RollsRoyce Overseas Holdings Ltd (RROH) and Hong Kong Aircraft Engineering Company Ltd (HAECO) have agreed to a restructuring of their JVs. 
  • Currently, SIAEC and HAECO have JVs with Rolls-Royce – SAESL (50% SIAEC, 30% RROH, 20% HAESL) and HAESL (45% HAECO, 45% RROH, 10% SIAEC). SAESL and HAESL both perform maintenance, repair and overhaul (MRO) of Rolls-Royce civil aero engines and components out of Singapore and Hong Kong, respectively. 
  • The restructuring will see SIAEC divest its 10% stake in HAESL in equal proportion to RROH and HAECO while HAECO to divest its 20% stake in SAESL to RROH. 
  • The divestments are expected to result in a net gain of ~S$186.8m for SIAEC for FY16, comprising S$148.7m (less estimated costs) from the divestment, and S$38.1m in dividend from HAESL. 
  • Beyond the considerations, the restructuring will result in termination of territory based rights of SAESL and HAESL, which in our view, will allow SIAEC group to compete more effectively globally in aerospace MRO industry. 
  • We opt to keep our forecasts unchanged as we will be seeking further clarity from management. Maintain HOLD with the same FV of S$3.85 for now.


Eugene Chua OCBC Securities | http://www.ocbcresearch.com/ 2015-11-24
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 3.85 Same 3.85


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