ST Eng: Its unit, ST Aerospace will partner Guangdong Airport Mgt Corp (GAMC) to set up a commercial aircraft heavy maintenance facility in Guangzhou, China. ST Aerospace will own a 49% stake, and GAMC the remaining 51%. They will both invest US$99m in the entity, ST Aerospace (Guangzhou) Aviation Services, which will be operated and managed by ST Aerospace. The JV, however, is pending approval by the Chinese govt, has already been endorsed by the Civil Aviation Administration of China.
The facility will have 2 hangars located at Guangzhou Baiyun In'tl Airport - each able to accommodate two widebody aircraft simultaneously. Construction is expected to take about 2yrs, after which the facility will provide maintenance and modification services for Boeing and Airbus aircraft. The JV brings the no. of ST Aerospace's China establishments to four. Its three other JVs in China are an aircraft maintenance, repair and overhaul (MRO) company in Shanghai; an engin
and an import-export facility in Guangzhou. The stock currently trades at 20x FY10 and 18.5 FY11 PER but share price is supported by div yield of almost 5%. Kim Eng has a HOLD rating with TP of $3.15.
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