SIA Engineering

SIA Engineering: The recent downtrend started just after the release of its results on 22 Jul, despite reporting steady results and stable outlook. Maybank-KE remain positive on the stock, reiterating that the market has not fully appreciated the hidden value in its key JVs with Rolls Royce, which should benefit from the influx of Trent engines into the market. Management was however cautious on the challenging operating environment with uncertainties facing the global economy. Maybank-KE also highlighted near-term weakness with early retirement of some Cathay Pacific’s B747-400s. Overall, SIA Engineering has a strong balance sheet (net cash of $619m) and provided free cash flow of $88m the previous quarter. Maybank-KE sees the strong balance sheet and cash generating ability of the business should allow the group to payout an increasing level of dividends to shareholders.