SIAEC

SIAEC: Posted weak results. 1H results made only 41% of Maybank-KE estimates, which is already below consensus. Expect FY15 to be worst in a decade. 2QFY15 net profit fell 40.7% y/y to $42.1m, while revenue fell 3% to $285.2m. with lower airframe and component overhaul revenue offset by higher fleet management revenue. Contribution from its engine repair shops fell 4% to merely $20m, due to extension of “on-wing” life of certain models and accelerated retirement of older engines. Overall expenses increased 1.5% to $269.3m, primarily due to higher subcontract costs. Bottom line also weighed by share of associates and JVs profits which fell 36.2% to $29.1m. With workload is declining at a time of rising operating costs, bottom-line pressure is expected to stay in the coming quarters. Structurally, business conditions have clearly deteriorated as airlines scale-back capacity to combat regional surplus. While forward thinking management will continually take strategic measures to grow business, Maybank-KE doubts impact will be material in the near term. Valuations are also rich at 30x FY15e P/E, with a yield of merely 3.3%. Interim DPS of 6¢ (1HFY14: 7¢). Latest broker ratings: Maybank-KE maintains Sell with lower TP of $3.50 from $4.80