SIA Engineering - UOB Kay Hian 2023-11-07: 1HFY24 Results In Line; Strong Underlying Demand Driving Improving Earnings

• SIA Engineering’s 1HFY24 net profit of S$59m (+83% y-o-y) is in line with our expectation, at 49% of our full-year forecast. Underlying demand for MRO services remained strong, although earnings of the engine and component division were still somewhat hindered by supply chain issues.
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• Maintain BUY with an unchanged target price of S$2.67.

1HFY24 Bottom line in line.

• SIA Engineering (SGX:S59)’s 1HFY24 net profit of S$59m (+83% y-o-y) is in line with our expectations, forming 49% of our full-year forecast. 2QFY24 net profit of S$32m (+64% y-o-y) was an improvement over 1QFY24’s S$27m.
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Operating profit behind our projections...

• 1HFY24 operating profit of consolidated entities was merely a breakeven, missing our expectations. The miss was due mainly to the still loss-making position of the newly established engine and component division, whose performance:
  1. has yet to stabilise, and
  2. was adversely affected by the shortage of components related to sector-wide supply chain issues.
• In addition, 2QFY24 recognised an impairment loss of receivables of over S$2m, mostly related to MYAirline, which has suspended operations since mid-Oct 23.
• Excluding the impairment loss, SIA Engineering would have recorded a small positive operating profit in 2QFY24.

…but the miss was offset by strong JV/associate contribution...

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Roy Chen CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-11-07 SGinvestors.io

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