Looking for a trusted Stock Remisier? Augustine works closely with a small group of clients - providing regular market updates, Bazi & astrology wealth insights, and clear guidance to invest with confidence.
SIA Engineering (SIE)’s 1HFY3/23 net profit of S$32m (+30% yoy) was above expectations due to stronger JV contribution (+213% yoy) from more engine inductions.
Core business and JV/associates recovering faster than expected, but expect high staff costs to persist. Management maintained its cautious guidance.
Our TP is raised slightly to S$2.44, pegged to 1.6x CY23F P/BV. Net cash healthy at c.25% of current market cap.
Stronger revenue and JV contribution, but higher opex
SIA Engineering (SIE) reported 1HFY3/23 net profit of S$32m (-24% hoh, +30% yoy), forming 59% of our and 45% of Bloomberg consensus FY22F forecasts. This was below consensus expectations, but above ours due to stronger JV contribution.
1HFY23 revenue improved 37% yoy to S$362m on the back of rising flight volumes at Changi Airport. EBIT loss widened to S$10.8m (vs. 1H22: S$6.7m loss), with higher revenue offset by higher material (+39% yoy) and staff costs (+51% yoy).
Share of associates’ and JV profits rose 54% yoy to S$41m mainly from better engine and component works (SAESL). No interim dividends were proposed in view of the tough operating environment.
SIA Engineering 1HFY23 revenue recovered to 69% of pre-Covid-19 levels
Group revenue recovered to 69% of pre-Covid-19 levels in 1HFY23 (vs. 2HFY22: 59%), with both airframe overhaul and engine & component recording strong yoy growth of 35% and 51%, respectively.
Flights handled by SIE at Changi Airport increased to 45k (+67% hoh, +118% yoy) in 1HFY23 in tandem with rising aviation traffic. Engine & component JVs/associates recorded stronger engine induction volumes in 1HFY23 from rising aircraft utilisation in the region.
In view of the faster-than-expected pace of recovery, we raise our FY23-25F revenue by 1-7% and our associates/JV contribution by 2-19%.
SIA Engineering elevated staff costs likely to persist; guidance remains cautious
Staff costs rose further to S$192m (+24% hoh, +51% yoy) in 1HFY23, which we attribute to 1) rising headcount, and 2) inflationary pressures. Management shared that the group increased its headcount in 1HFY23 ahead of the expected recovery in flight volumes.
Line maintenance headcount is already close to desired levels, while further headcount increase is expected for base maintenance and engine services, according to the management. We raise our FY23-25F staff costs further by 3-7% accordingly.
Valuation/Recommendation
Reiterate Add at a higher TP of S$2.44, based on 1.6x CY23F P/BV. With our new assumptions, our FY23F EPS is raised by 30%, while FY24-25 EPS is tweaked up by 0.2-2.3%.
Net cash remains healthy at S$606m (c.25% of the group’s current market cap). We reiterate Add at a slightly higher TP of S$2.44, pegged to 1.6x CY23F P/BV, based on c.1 s.d. below the group’s 6-year historical average.
The group currently trades at 1.4x CY23F P/BV, 1.2 s.d. below historical mean. Re-rating catalysts include quicker improvement in labour shortages, and reopening of China. Downside risks include recession risks and margin erosion from rising cost pressures
SIA Engineering share price chart
You can find the full reporthere and the company website here
Be A Valued Client of Augustine in Lim&Tan Securities
Receive Augustine’s regular stock updates via Telegram plus full access to his private client hub with exclusive research, astrology and Bazi insights.
(Exclusive Readings for Clients Only)
BaZi investment loss prediction is an ancient yet highly practical approach to understanding financial timing using Chinese astrology. In BaZi (八字), also known as the Four Pillars of Destiny, your birth chart reveals how the Five Elements (Wood, Fire, Earth, Metal, Water) interact to shape your personality, opportunities, and wealth potential. Among these, the Wealth
When market sentiment turns upbeat and investors begin looking beyond the large-cap names for fresh drivers of growth, Singapore’s small cap stocks could quietly offer outsized upside. With interest rates stabilising, infrastructure spending picking up, and niche sectors recovering, several overlooked companies may shine in the next market rally. Here are four SGX-listed small-caps worth
You don’t need to be the next Warren Buffett to succeed in investing. But you do need to find your own investing style – so that you compound your wealth that fits your personality, lifestyle, and long-term goals. The truth is, there’s no “one size fits all” approach. Some investors love diving into spreadsheets. Others
Investing in the stock markets can be tricky and you will probably lose hell a lot of money even before making any if you lack the right guidance. Thus, as a beginner, it’s important to avoid making the common mistakes that others have made. In fact, these mistakes offer paramount lessons for you to cut
