SIA Engine

SIA Engine: Maybank-KE reiterating BUY and $6.19 TP, with SIAE as the sector top pick for its pure play to the aviation growth story in the region. Recently announced MOU by VietJetAir with Airbus for up to 92 A320s gives scope for SIAEC to extend the service contract under its Fleet Management Programme (FMP), given that VietJetAir is an existing customer. Continuing traffic growth remains highly visible as Singapore aims to double its terminal handling capacity by mid-2020s. As a dominant player in Changi Airport, expect this development will keep SIAEC’s line maintenance division highly profitable. Higher dividend distribution to shareholders possible with SIAEC keeping a high cash pile. While SIA Group has little problem funding the huge aircraft orders placed over the past year, think SIAEC should return the excess cash to its parent company, which can then be redeployed to fund future capital expenditure.