SIAEC – OCBC

FY13 within expectations

  • PATMI climbs 0.4% YoY
  • EPS is 98% of ours and street’s FY13 est.
  • Increase FV to S$5.00

FY13 as anticipated

SIA Engineering Company’s (SIAEC) FY13 results were in line with ours and the street’s expectations. Revenue decreased 2.0% to S$1,147m, chiefly due to lower fleet management and project revenue. Project revenue refers to the provision of services for the cabin interior reconfiguration of aircraft. Operating profit fell 1.2% to S$128.1m. Share of profits from associated and JV companies increased 1.5% to S$159.2m, representing a contribution of 52.0% of the group’s pre-tax profits. PATMI was up 0.4% to S$270.1m. Basic EPS of 24.51 S cents formed 98% of ours and the street’s FY13 estimates.

Slight improvement in operating margin

Salary costs increased 5.7% to S$498.2m due to wage increases; headcount stayed roughly flat. Increase in staff cost was outweighed by decreases in subcontract services (-19.3% to S$136.7m on the back of lower project costs), material cost (-2.2% to S$214.2m) and overheads (-6.3% to S$169.5m), leading expenditure to fall 2.1% to S$1,019m.

Business likely to remain stable

Management guides that the group’s business is expected to remain stable in the near term while acknowledging that the operating environment remain challenging due to uncertainties regarding the world economy. SIAEC will continue to focus on improving productivity and controlling costs. Management is continuously evaluating potential investment opportunities.

Maintain HOLD

The board is recommending a final ordinary dividend of 15.0 S cents, which will bring total FY13 dividends to 22.0 S cents per share. SIAEC intends to maintain a payout ratio of 85-90%. Increasing our P/E peg from 17.1x to 20.0x and using an EPS forecast of 25.0 S cents for FY14F, we increase our fair value from S$4.38 to S$5.00 and maintain our HOLD rating on SIAEC.

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