SIA Engine

SIA Engine: 4QFY15 results trailed estimates, with net profit skidding 36.5% to $41.4m, taking FY14 earnings to $183.3m (-31%).

Revenue for the quarter fell 11.3% to $276m due to fewer heavy checks from its airframe and component overhaul segment, partially mitigated by higher fleet management revenue.

Overall expenditure fell 2.4% to $252.9m, largely due to a reduction in material usage in line with the decline in the number of heavy checks and lower staff costs, offset by higher subcontract costs.

Bottom line was further knocked by a 41% slide in share of associates' profit to $21.3m, on weaker contributions from engine repair and overhaul centres.

Going forward, management guides that the operating environment for the MRO industry remains challenging, and that advancements in the newer generation engines have improved aircrafts reliability, resulting in a reduction to engine shop visits.

Final DPS slashed to 8.5¢, bringing full year payout to 14.5¢ (FY14: 25¢).

At the current price SIAE trades at 26.1x FY15 P/E.

Latest broker ratings:
Maybank-KE maintains Sell with TP of $3.30 (prev. $3.50)
CIMB maintains Reduce with TP of $3.80 (prev. $3.90)
OCBC maintains Sell but places TP of $3.80 under review