SIA Engineering - OCBC Investment 2020-05-15: A Long Road To Recovery

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

SIA Engineering - A Long Road To Recovery

  • Support Schemes amounting to S$25.6m.
  • Line maintenance and fleet management took the first hit.
  • Recovery pace of MRO business is likely to be slow.



Results above expectations helped by government support

  • SIA Engineering (SGX:S59)’s 4QFY20 results came in above our forecasts. Revenue fell 10.4% y-o-y to S$229.3m due to lower revenue from the airframe and line maintenance segment. PATMI, however, rose 5.9% y-o-y to S$52.2m, thanks to S$25.6m government support under the Job Support Scheme and the Credit Scheme, as well as better than expected performances from its JVs & Associates (+8.0% y-o-y).
  • For FY20, SIA Engineering’s revenue fell 2.6% y-o-y to S$994.1m, while PATMI rose 20.4% y-o-y to S$193.8m, mainly attributable to higher operating profit and contribution from share of profits of JVs & Association.
  • Together with the interim and final dividends of 3 S cents and 5 S cents, total dividend declared for FY20 was 8 S cents versus 11 S cents in FY19.


Reduction of flights hurt SIAEC’s core business

  • SIA Engineering’s airframe and line maintenance segment (88.5% of FY20 revenue) took a direct hit from a reduction in flights caused by COVID-19. Fleet management (8.9% by FY20 revenue) was also significantly impacted as its revenue is largely based on flying hours.
  • While management noted that the impact on base maintenance was less significant in the near-term, a prolonged COVID-19 will weigh on MRO (maintenance, repair & overhaul services) given extended maintenance intervals and less heavy maintenance required with the grounding/parking of more old aircrafts (leaving newer aircraft in operations).


Pace of recovery largely depends on rebound in travel demand






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-05-15
SGX Stock Analyst Report SELL MAINTAIN SELL 1.41 DOWN 2.410



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