SIA ENGINEERING CO LTD (SGX:S59)
SIA Engineering - A Better Quarter
- SIA Engineering's 1QFY21 net profit grew 35.5% y-o-y, thanks to JSS.
- Singapore eyes quarantine-free travel in September.
- Valuation is undemanding.
SIAEC's 1QFY22 business updates
- SIA Engineering (SGX:S59)’s (SIAEC)’s 1QFY22 revenue rose 5.7% y-o-y to S$125.3m, driven by a recovery in flight activities. Share of profits of associates and JVs improved 8.0% y-o-y to S$12.8m. As such, PATMI grew 35.5% y-o-y to S$14.5m in 1QFY22, continued to be supported by government support under the Job Support Scheme (JSS). Stripping off the impact of JSS, SIA Engineering would have recorded a net loss of S$24.1m.
Sequential improvement
- We saw sequential improvement in 1QFY22 with flights handled at Changi by line maintenance and number of flights checked at Singapore base growing 13% and 31% q-o-q respectively. Majority of the checks performed at Singapore base were from light checks (+39% q-o-q) as compared to heavy checks (+5% q-o-q).
- In terms of recovery, we believe line maintenance should benefit first with increase in operating flights. Fleet management driven by flying hours, will come next. Base maintenance which requires the aircraft to be taken out of service for longer periods could take a longer time to see demand come back.
Likely to benefit from selective opening of borders at Changi Airport
- With already more than half of its population fully vaccinated, Singapore is on track to reach the 80% vaccination target by September. The government also eyes quarantine-free travel in September. The high inoculation rate will create opportunities for a gradual and selective opening of borders by end of 2021, which in turn will support the recovery of SIA Engineering.
- SIA Engineering is trading at forward price-to-book ratio of 1.46x, which is 1.2 standard deviation below its historical average of 2.04x. We find the valuation is undemanding. We maintain our fair value estimate at S$2.37.
- See
SIA Engineering's ESG Updates
- SIA Engineering performs better than its global peers in terms of environmental and social issues due to its strong efforts to mitigate adverse environmental impact of operations, and low injury and fatality rates. However, SIA Engineering’s corporate governance falls behind its peers due to concerns relating to the board and ownership structure.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2021-07-27
SGX Stock
Analyst Report
2.370
SAME
2.370
