SIA Engineering

SIA Engineering: 1Q13 results in-line with expectations, reinforcing view that it offers earnings growth, high ROEs, almost-zero debt, decent yields and reasonable valuations. Rev rose 8% yoy due to higher fleet management rev During previous discussions, mgt had indicated that it expected to add 20 aircraft to the fleet mgt programme, bringing the total to 180 in FY13 (FY11: 120, FY12: 160). No segmental breakdown is provided but CIMB believe that line maintenance could have risen in 1QFY13 with stronger aircraft movements at Changi Airport (no. of flights handled up by 8% yoy to 880 flights/day). Operating costs rose 11% yoy to $257m, mainly due to a 20% rise in material costs and a 24% increase in other and subcontract costs. This suggests a higher workload form airframe & component MRO. Mgt expects stable demand for core MRO in the near term. Associates/JVs profits increased 8% yoy and 4% qoq in 1Q13. The steady US$/S$ rate during the quarter suggests that the underlying operations are growing. Ratings as follow: CIMB maintains OutPerform with $4.56 TP.