SIA Engineering - OCBC Investment 2022-05-09: Recovery Gaining Momentum

SIA ENGINEERING CO LTD (SGX:S59)

SIA Engineering - Recovery Gaining Momentum

SIA Engineering (SGX:S59)’s 2HFY22 revenue increased 37.5% y-o-y to S$302.6m, driven by higher flight activities. However, the increase in revenue was insufficient to offset lower grant from government wage support and higher costs arising from the progressive rollback of manpower measures as travel recovers. Consequently, SIA Engineering reported an operating loss of S$15.1m in 2HFY22, compared to a profit of S$2.2m in 2HFY21.
Share of profits of joint venture and associates rose more than fourfold y-o-y to S$52.3m, mainly due to tax write back as compared to tax charge taken last year. All-in, SIA Engineering's bottom-line improved from S$7.8m in 2HFY21 to S$42.6m in 2HFY22.
For full year, SIA Engineering's PATMI turned from a loss of S$11.2m in FY21 to a gain of S$67.6m in FY22, below our expectations on higher-than-expected increase in operating costs. Excluding the impact of the Job Support Scheme of S$93.5m (vs. S$155.4m in FY21), PATMI would have recorded a loss of S$25.9m.
No dividend was declared by SIA Engineering for FY22, similar to the same period last year.

Recovery was stronger in the second half of FY22, supported by easing travel restrictions and reopening. Flights handled at Changi by line maintenance improved 65% y-o-y/31% h-o-h in 2HFY22.
For base maintenance, the number of heavy and light checks performed at Singapore base rose 31% and 63% y-o-y respectively in 2HFY22. Lighter work content remained the bulk of these checks. Moreover, work volume for the fleet management business grew 8% y-o-y due to higher flight hours.

Flights handled at Changi airport had recovered to ~45% of its pre-COVID levels in Apr 2022. As airlines ramp up capacity in line with the recovery of air travel demand to S$2.90.
See

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2022-05-09

SGX Stock Analyst Report BUY MAINTAIN BUY 2.90 UP 2.680