SIA Engineering - Maybank Kim Eng 2019-07-29: Run Its Course For Now

SIA ENGINEERING CO LTD (SGX:S59) | SGinvestors.io SIA ENGINEERING CO LTD (SGX:S59)

SIA Engineering - Run Its Course For Now


SIAEC 1Q20 in line; Downgrade to HOLD

  • SIA ENGINEERING CO LTD (SGX:S59)'s 1Q20 results were in line with our expectations with revenue/PATMI accounting for 23%/25% of FY20E forecast.
  • Consolidated operations performed slightly better than anticipated principally from lower operating costs but this was offset by softer than expected associates/JVs performance.
  • SIA Engineering’s business transformation initiatives appear to be on track but the c8% share price appreciation over the past month mutes return potential to our SGD2.85 target price.
  • Downgrade to HOLD from BUY.



Associates dragged the operating growth

  • Although revenues were flat y-o-y, lower operating costs drove margin improvement and a significant 51% y-o-y increase in EBITDA (albeit from a low base in 1Q19). However this EBITDA growth was offset by weaker than expected associates/JV profit, down c20% y-o-y.
  • Engine and components associates/JVs contribution fell c19% y-o-y on account of higher costs incurred for new engine capabilities, while airframe and line maintenance associates/JVs losses widened marginally to SGD0.7m.


Guidance issues linger.


Minor forecast tweaks; valuation unchanged






Neel Sinha Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-07-29
SGX Stock Analyst Report HOLD DOWNGRADE BUY 2.850 SAME 2.850



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