SIA Engineering Company Ltd - Phillip Securities 2016-07-27: Bottom line boosted by one-offs

SIA Engineering Company Ltd - Phillip Securities 2016-07-27: Bottom line boosted by one-offs  SIA ENGINEERING CO LTD S59.SI 

SIA Engineering Company Ltd - Bottom line boosted by one-offs

  • S$271.6mn revenue missed our expectations of S$285.6mn by 4.9%; met 23.7% of consensus full year expectations of S$1.146bn.
  • S$41.7mn adj. PATMI missed our expectations of S$46.2mn by 9.7%; met 23.9% of consensus full year expectations of S$174.4mn.
  • Overall business anaemic with headline PATMI boosted by non-recurring gains.

 Reported PATMI includes several one-offs

  • Reported PATMI of S$198.4mn includes three one-offs. There is S$141.6mn gain from divestment of the Group's 10% stake in Hong Kong Aero Engine Services Ltd (HAESL) and special dividend of S$36.4mn from HAESL's divestment of its 20% stake in Singapore Aero Engine Services Ltd (SAESL). Total gains from divestment during the quarter was S$178.0mn. 
  • In addition, there was a S$21.3mn provision made on Staff costs expense in relation to the profit-linked component of staff remuneration arising from the gain on divestment of HAESL.

 Anaemic overall: uninspiring revenue; associates and JVs continue to be a drag

  • We were expecting modest revenue growth, after two previous consecutive quarters of y-o-y revenue growth. Instead, slump in the fleet management revenue outpaced contribution from the other business segments. 
  • Contribution from Associates and JV also did not meet our expectations. Our disappointment was mainly due to the contribution from JVs, which was 22.1% lower y-o-y, as we were expecting some uptick in engine jobs to start trickling in.

Downgrade to "Reduce" rating with lower target price of S$3.39 (previous: S$3.51)

  • Disappointing set of results have led us to trim our estimates on contributions from JVs, resulting in 4.3%/10.6% lower FY17/FY18 recurring PATMI.

Richard Leow CFTe Phillip Securities | 2016-07-27
Phillip Securities SGX Stock Analyst Report REDUCE Downgrade NEUTRAL 3.39 Down 3.51