SIE

SIE: Mildly negative read-through from peer HAECO’s disappointing FY13 results, dragged by weaker-than-expected performance at its HAESL unit. Two main reasons were cited: i) Early retirement of B747 aircraft by global airlines resulted in a decline in maintenance demand for the RB211 engines, and ii) Improved reliability of the Trent 700 engines used on the A330s has led to fewer shop visits. HAECO believes the near term outlook for HAESL would remain weak. Negatives for SIE include: i) lower dividends from its 10% stake in HAESL, and ii) similar issues may be faced by its SAESL unit, which shares common customers and capabilities with HAESL Maybank-KE trims FY15-17e earnings by 2-5% to reflect the latest developments and lowers TP to $5.75 (from $5.88). But keeps its Buy rating as the long term growth for MRO demand remains bright, underpinned by an expected doubling of the Trent engine fleet over the next five years.