SIA Engineering

SIA Engineering: 3QFY15 results at the bottom end of estimates, with a 23.5% fall in net income y/y to $46.3m, as revenue slipped 6.5% to $265.3m, due to fewer heavy checks in its airframe and component overhaul segment, but mitigated by higher fleet management and line maintenance. Meanwhile, strong cost control from lower staff and material expenditure led to a relatively stable operating profit (-3.6%), but bottom line was weighed by a 33.2% tumble in share of profits from associates and JVs, attributed to lower contributions from engine repair and overhaul centres. This brought 9MFY15 earnings to $141.9m (-29.2%) and revenue to $844.6m (-2.6%), 73% and 72%, respectively, of streets' full year estimates. Management guided for business outlook to remain challenging, plagued by intense competition and increasing business costs, which may pressure margins. As the group continued to be plagued by the structural weakness at engine repair and overhaul centres, Maybank-KE maintains its SELL rating on the counter (TP $3.50) on rich valuations (25x forward P/E vs 10-year average of 16.7x), citing the impending cut in dividends as a negative catalyst. Latest broker ratings: OCBC maintains Sell with TP of $3.80 CIMB maintains Reduce with lower TP of $3.90 (from $4.00) JP Morgan retains Overweight with TP of $5.30