Company Update: SIA Engineering Co. Ltd. (SIE SP/ S59.SI)
Company Update: 15 November 2024
Maintain strength amidst flight recovery.
- Continued flight recovery. SIAEC saw total flights handled by the company’s line maintenance business reaching 95% of pre-COVID level as of September 2024. The increased flight activities contributed to an increased demand for aircraft maintenance, repair, and overhaul (MRO) services. This recovery trend is expected to continue as more airlines ramp up flight schedules, alongside the arrival of the year-end peak travelling season, alongside more visa-free travel agreements between countries.
• Subang base operational in 2H25
Base Maintenance Malaysia Sdn. Bhd. (BMM), a wholly owned subsidiary under SIAEC signed a lease agreement for Hangar facilities in Subang, Malaysia in December 2023. This adds 2 more hangar facilities with a combined capacity of six simultaneous aircraft checks with a lease term of 15 years to SIAEC’s portfolio. The hangars are expected to begin operations in the second half of 2025 and contribute to the group’s revenue growth.
1HFY24/25 financial results
SIAEC reported revenue of S$576.2mn for 1HFY24/25, up 12.1% YoY, compared to S$514.0mn in 1HFY23/24, as the company continues to benefit from the recovery of demand for aircraft MRO services. The company also reported a 1HFY24/25 operating profit of S$3.4mn, compared to an operating profit of S$0.1mn in 1HFY23/24. Group profit after tax came in at S$68.8mn in 1HFY24/25, up 16.0% YoY, compared to S$59.3mn in 1HFY23/24, largely attributed to a higher share of profits of JVs and Associated companies.
Valuation & Action
We maintain an OUTPERFORM recommendation with an unchanged TP of S$2.59, based on Discounted Cash Flow (DCF) valuation, with a terminal growth rate of 2.5% and a WACC of 8.49%.
Risks
SIAEC’s primary risk is associated with global flight activities, a key revenue driver for SIAEC. The resurgence of a
pandemic, the emergence of a new pandemic, natural disasters, or ongoing geopolitical tensions could significantly impact and reduce flight activities, thereby dampening SIAEC’s revenue.
With business operations located across different markets, SIAEC is bound to transact business in different kinds of currencies. Businesses with SIAEC’s customers are denominated in a foreign currency. As such, the company is exposed to translation risk resulting from transactions denominated in foreign currencies.
