KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

Company Initiation: SIA Engineering Co. Ltd.

Company Update: 12 April 2024

Capturing the resurgence of flight activities

Flight recovery to boost MRO services and activities. Global air travel has been rebounding, approaching pre-pandemic levels as restrictions ease, with flight activities surging to around 78% of pre-pandemic levels. Geopolitical uncertainties have also boosted air freight demand. The aviation industry is expected to continue growing in 2024, leading to an increased demand for SIA Engineering‘s (SIAEC) Maintenance, Repair, and Overhaul (MRO) services.

Strong operating statistics on track to surpass pre-pandemic levels.

In 3Q24, SIAEC witnessed a significant rise in flights managed at Changi Airport through line maintenance, a primary revenue stream for the company. This growth in MRO services correlates with the rebound in flight operations, highlighting SIAEC’s adeptness in capitalizing on increased demand following the recovery of flights, establishing its dominance as a market leader in MRO services in Singapore. For 9M24, the number of flights managed through Line Maintenance surpassed FY23 levels and reached 72% of FY20 levels, signaling a trajectory towards pre-pandemic levels by FY24’s end. Additionally, both light checks and overall operations at SIAEC’s Singapore base have surpassed pre-pandemic levels, showcasing the company’s capability to meet the heightened demand for MRO services amid the resurgence of flight activities at Changi Airport.

Strong Cash position and drive growth.

SIAEC currently holds an impressive cash position (cash and bank balance & short-term deposits) of S$578.9 million, showcasing strong financial health. The company’s cash ratio of 2.38x also ensures it can clear debt, finance growth, and avoid extra borrowing or equity issuance. This solid financial position enhances investor confidence, attracting potential partners, investors, and lenders. We initiate with an OUTPERFORM recommendation and a 12M target price of S$2.59.

Valuation & Action

We initiate with an OUTPERFORM recommendation and a TP of S$2.59, based on a Discounted Cash Flow (DCF) valuation, with a terminal growth rate of 2.5% and a WACC of 9.2%. SIAEC’s strong cash position sheet, with a low gearing ratio, put the company at a competitive advantage against its competitors. The company would be able to use its strong financial position to drive more growth in its current B2B business globally, and at the same time keep a lookout for potential acquisition opportunities. We derive a TP at S$2.59 with a 15.0% upside as we emphasize its strong financial position and business model that would allow the company to capture its recovery momentum effectively to further grow and expand its market presence.


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.

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