SIA Engg

SIA Engg: 1HFYMar13 results in line. Revenue was up 6.4% yoy to $585m, but net profit declined 1.5% yoy to $137.2m, impacted by FX loss ($3.7m) and stock obsolescence provision $3.3m). Also 1H12 was inflated by a tax write back of $3.1m. Associate and JV contribution and increased by 1.4% yoy to $78.8m, and accounted for 51% of pre tax profits. Mgt declared an interim div of 7cts, +17% yoy. The group has a net cash position with $432m cash. Mgt guidance for the remainder of the yr re-emphasized that demand for aviation MRO services is expected to be maintained in the near term though macro economic risks remain. Cost control and efficiency improvements remain the key focus area given subdued demand growth expectations. Nomura believes that demand for the group’s businesses will remain stable in the near term. Says relatively stable EBIT margins and revenue growth are indicative of aviation after market demand being sustained, despite high jet fuel prices and macro uncertainties. Nomura maintains Neutral with TP $4.60, says valuation at FY/1314e P/E of 16x / 15.2x and P/B of 3.1x/2.8x is reasonable. OCBC maintains at Hold, raises TP to $4.14 from $4.04.