SIA Engineering - CGS-CIMB Research 2022-11-02: Promising Pace Of Recovery

SIA Engineering - Promising Pace Of Recovery

  • SIA Engineering (SGX:S59) reported 1HFY23 (Apr to Sep 2022) net profit of S$32m (-24% h-o-h, +30% y-o-y), forming 59% of our and 45% of Bloomberg consensus FY22F forecasts. This was below consensus expectations, but above ours due to stronger JV contribution. No interim dividends were proposed in view of the tough operating environment. See SIA Engineering's announcement dated 2 Nov 2022.
  • 1HFY23 revenue improved 37% y-o-y 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% y-o-y) and staff costs (+51% y-o-y).
  • Share of associates’ and JV profits rose 54% y-o-y to S$41m mainly from better engine and component works (SAESL). Group revenue recovered to 69% of pre-COVID-19 levels in 1HFY23, with both airframe overhaul and engine & component recording strong y-o-y growth of 35% and 51%, respectively.
  • Flights handled by SIA Engineering at Changi Airport increased to 45k (+67% h-o-h, +118% y-o-y) in 1HFY23 in tandem with rising aviation traffic.
  • In view of the faster-than-expected pace of recovery, we raise our FY23-25F revenue forecast for SIA Engineering by 1-7% and our associates/JV contribution by 2-19%.
  • Staff costs rose further to S$192m (+24% h-o-h, +51% y-o-y) in 1HFY23, which we attribute to
    1. rising headcount, and
    2. inflationary pressures.
  • Management shared that SIA Engineering 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.
  • SIA Engineering's net cash remains healthy at S$606m (~25% of the group’s current market cap). We reiterate ADD recommenation on SIA Engineering at a slightly higher target price of S$2.44, pegged to 1.6x CY23F P/BV, based on ~1 standard deviation below the group’s 6-year historical average.
  • SIA Engineering's share price currently trades at 1.4x CY23F P/BV, 1.2 standard deviation below historical mean.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

Kenneth TAN CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | 2022-11-02

Previous report by CGS-CIMB:
2022-10-25 SIA Engineering - Valuations Close To COVID-19 Lows.

Price targets by 3 other brokers at SIA Engineering Target Prices.
Listing of research reports at SIA Engineering Analyst Reports.

Relevant links:
SIA Engineering Share Price History,
SIA Engineering Announcements,
SIA Engineering Dividends & Corporate Actions,
SIA Engineering News Articles

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