SIA ENGINEERING CO LTD (SGX:S59)
SIA Engineering - Continuing Recovery
- SIA Engineering's 3QFY22 net profit improved to S$33.2m.
- Sequential improvement in operating statistics.
3QFY22 results beat expectations on one-time writeback of tax provision
- SIA Engineering (SGX:S59) provided its 3QFY22 business update. Revenue rose 33.8% y-o-y to S$140.0m, driven by higher transit handling-related revenue on the back of a recovery in flight activities.
- Share of profits of associates and JVs jumped 226.0% y-o-y to S$40.1m, mainly due to a one-time writeback of tax provision by certain associated companies for the engine and component segment, as well as lower losses from the airframe and line maintenance segment (+S$5.4m y-o-y). As such, PATMI grew by S$25.5m (+331% y-o-y) to S$33.2m during the quarter, above our expectations.
Encouraging signs of recovery
- SIA Engineering benefitted from a recovery in flight activities and Singapore’s progressive reopening of borders. For 3QFY22, the continuing recovery trend is encouraging with flights handled at Changi by line maintenance growing 65% y-o-y, or 17% q-o-q to 12,860 (at 31% of pre-COVID-19 levels).
- In addition, number of flights checked at Singapore base increased to 117 (+70% y-o-y and +15% q-o-q). Majority of the checks performed at Singapore base remained largely from light checks (+19.5% q-o-q) as compared to heavy checks (flat q-o-q).
New Component and Services division to position for recovery and growth
- As the aviation sector recovers, management is optimistic about the demand outlook and growth for the MRO industry. To position the group for growth post-pandemic, SIA Engineering announced the formation of a new Component Services division (CSD) to grow its component maintenance, repair and overhaul (MRO) business. Following the announcement, SIA (SGX:C6L) announced the setup of a component MRO joint venture with SR Technics to expand its MRO network in Malaysia.
- As Singapore presses on with its “living with the pandemic” strategy, and global travel demand recovers, we believe SIA Engineering will be a key beneficiary. SIA Engineering is trading at undemanding valuations with price-to-book ratio of 1.5x (near 1 standard deviation below its history average of 2.2x).
- We revise our estimates but maintain our fair value estimate at S$2.68 for SIA Engineering.
- See
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2022-02-22
SGX Stock
Analyst Report
2.680
SAME
2.680
