Aerospace MRO Sector - DBS Research 2020-08-18: Extended Jobs Support Scheme (JSS) A Shot In The Arm

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Aerospace MRO Sector - Extended Jobs Support Scheme (JSS) A Shot In The Arm




Singapore government extends support for critical sectors.

  • The Jobs Support Scheme (JSS), which earlier covered 9 months of wage support for Singaporeans till August 2020, will now be extended for another 7 months from September 2020 till March 2021. Firms in the aerospace, aviation and tourism sectors, the hardest hit by the pandemic, are currently receiving 75% JSS support (includes SIA Engineering and ST Engineering’s Aerospace division). The support has been extended and these firms will receive a lower quantum of 50% in wage support for an additional 7 months.


Support to offset some of the pain for MRO providers.

  • The global MRO industry is expected to shrink by almost 50% in 2020 and will probably take till 2022/23 to recover to pre- COVID levels. Singapore’s MRO sector is also expected to feel similar pain in 2020, and without the JSS grants, companies like SIA Engineering would have been in the red in the current financial year. Thus, the extension of JSS comes as a relief for the sector and will benefit overall earnings in 2020 and 2021.


Revising up earnings estimates for SIA Engineering and ST Engineering.

  • Factoring in the extended JSS, SIA Engineering should accrue an additional S$60m in grant income in FY21, in addition to our earlier estimate of S$125m. This will help boost FY21F earnings by 61%, though FY22 earnings will not be affected that much.
  • For ST Engineering, we estimate c.S$110m of additional JSS related grants will be available in FY20/21 on top of our previous estimate of S$300m – of which around S$60m is likely to be recognised in FY20 and the remaining in FY21. This means we would be raising FY20/21F earnings estimates for ST Engineering by 12% and 9% respectively, not as steep as SIA Engineering.


Upgrade SIA Engineering and ST Engineering to BUY.






Suvro Sarkar DBS Group Research | Jason SUM DBS Research | https://www.dbsvickers.com/ 2020-08-18
SGX Stock Analyst Report BUY UPGRADE HOLD 2.40 UP 2.100
BUY UPGRADE HOLD 3.80 UP 3.400



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