SIA Engineering Company

[weijian]

A good piece of news, as SIAEC's MRO capabilities now extend to GE engines for its JVs (previously it was ESA - Pratt and Whitney, SAESL - Rolls Royce). In addition, parentage does matter as SIA is a big plane customer and hence with its favorable orders, it is able to insert potential new JVs (which SIAEC benefits from) as part of the package.

SIA Engineering Company and GE Aviation to form Engine Overhaul Joint Venture

PARIS, 20 June, 2017 – SIA Engineering Company Limited (“SIAEC”) and GE Aviation (“GE”) have agreed to establish a new engine overhaul joint venture based in Singapore. The joint venture will provide a full range of engine maintenance, repair and overhaul (MRO) services for the GE90 and GE9X engines. The GE90 engine exclusively powers the Boeing 777-300ER and 777-200LR, and the GE9X engine is the sole engine selection for the Boeing 777X aircraft.

The formation of the joint venture, where GE will have a 51% equity stake in the joint venture and SIAEC holding the remaining 49%, is subject to finalisation of the definitive agreements and receipt of required regulatory approvals. This partnership, which is expected to have benefits to and beyond the SIA Group, is made possible by Singapore Airlines' announcement in February 2017 of a letter of intent for 39 Boeing widebody aircraft valued at $13.8 billion, which includes 20 777-9s powered by GE9X engines. SIA is also a major operator of GE90-powered 777-300ERs.

http://infopub.sgx.com/FileOpen/SGXNET-2...eID=458480

[cyclone]

Singapore, 29 June 2017 – Embraer Asia Pacific has appointed SIA Engineering (Philippines) Corporation (SIAEP), a subsidiary of SIA Engineering Company Limited (SIAEC), as an E-Jets authorized service center. Embraer’s E-Jets family consists of the E170, E175, E190 and E195 aircraft. Based in Clark, The Philippines, SIAEP is a joint venture between SIAEC and Cebu Air, Inc. 

Embraer has a global fleet of 1,200 E-Jets, operated by 80 airlines in 60 countries. There are around 150 E-Jets operating in Asia Pacific and China. This excludes the number of E-Jets on backlog.

https://en.wikipedia.org/wiki/Embraer_E-Jet_family

[weijian]

Straits Times Index (STI) quarterly review

FTSE Russell announces that there will be one change to the constituents of the Straits Times Index (STI), following the September quarterly review. Jardine Strategic Holdings will join the STI and, as a result, SIA Engineering will leave the index

http://infopub.sgx.com/FileOpen/20170831...eID=469301

[cyclone]

Hot stock: SIA Engineering falls to six-year low on JPMorgan share sale

By WONG KAI YI
WED, OCT 04, 2017 - 9:31 AM  UPDATED WED, OCT 04, 2017 - 12:59 PM

Shares of SIA Engineering Co fell to their lowest since January 2010 on news that JPMorgan is selling 38.8 million shares in the aircraft maintenance, repair and overhaul (MRO) services provider for up to S$128 million.

The stock was trading down 5.2 per cent, or S$3.28 as at 11.38am on Wednesday, but had reached as low as S$3.15 earlier in the day.

The company's shares fell 5.75 per cent earlier in the morning, or 21 Singapore cents, to S$3.24 as at 9.35am on Wednesday, drawing a trading query from the Singapore Exchange (SGX).

More details in http://www.businesstimes.com.sg/stocks/h...share-sale

[cyclone]

On 4 October 2017, SIA Engineering bought back 419,300 shares at a price between SGD3.15 and SGD3.35 per share.
Total Consideration (including stamp duties, clearing changes etc) paid or payable for the shares was SGD 1,358,745.67.

[cyclone]

SIA Engineering Company to Form Line Maintenance Joint Venture in Thailand

SIA Engineering Company Limited ("SIAEC") today announced that it has entered into a joint venture agreement with NokScoot Airlines Co., Ltd ("NokScoot"), to form a line maintenance joint venture based in Thailand. Under the agreement, NokScoot will hold an equity stake of 51% in the joint venture, with SIAEC taking the remaining 49% stake. The agreement is subject to the receipt of regulatory approvals.

The joint venture will have an initial registration capital of THB63,680,000, or approximately S$2,740,000. NokScoot will subscribe for THB32,476,800, or approximately S$1,397,000, in cash and SIAEC will subscribe for THB31,203,200, or approximately S$1,343,000, in cash in the joint venture.

The joint venture will commence operations in Don Mueang International Airport (DMK) and subsequently expand to other key airports in Thailand.

NokScoot is an associate of Singapore Airlines, as it is 49% owned by Scoot Tigerair Pte Ltd. Scoot Tigerair Pte Ltd is wholly-owned by Budget Aviation Holdings Pte Ltd, which is a whollyowned subsidiary of Singapore Airlines ("SIA").

More details in https://links.sgx.com/FileOpen/SGXNET_20...eID=549413

[cyclone]

SIA Engineering Company Signs $1.4 Billion Services Agreement with Singapore Airlines

SIA Engineering Company Limited ("SIAEC") announced the signing of a comprehensive Services Agreement with Singapore Airlines ("SIA"), which will supersede the previous Services Agreement entered into with SIA in April 2015.

The new agreement, commencing 1 April 2019, is for a term of 2 years, with an option to renew for a further period of 2 years. SIAEC’s support of the SIA’s fleet covers a broad spectrum of maintenance, repair and overhaul (MRO) and fleet management support services. The agreement (if renewed after the first 2 years) is expected to yield a labour revenue of $1.3-1.4 billion over the 4-year term.

The transaction is not expected to have a material impact on the net tangible assets per share or the earnings per share of the SIAEC Group in FY2019/2020.

More details in https://links.sgx.com/FileOpen/SGXNET_20...eID=549584

[specuvestor]

I think the business fundamentals remains the same and it is unlikely going to change in the mid term. I think the strategies for the company is to
1) Acquire companies using a combination of share swap/debt. The stock is trading at high PEs.
2) Cut its cost structure through a reduction of benefits, staff retrenchment.
3) Improve productivity through business process re-engineering.

I do not think SIA is in trouble, since it is given a life line by low oil prices. I think profit for the next year will be very good, likely to be one of the best in the past ten years.

Hi csl

Actually I am more keen on the Ex-post analysis on whether the on-wing maintenance that we discussed was really hitting their earnings or just unsubstantiated concern.

As discussed in the SIA thread, SIA has been in trouble for the past few years from branding to positioning to TigerAir. Oil price is not something they can control but competitive advantage is. And their moat has more or less been eroded away. Ironically focusing on cost cutting can't build a moat in a service industry

My analysis prior shows that it is one of the concerns, and older engines being phased out is another. You might want to do your own due diligence to validate this point.

As to your second point, I agree to your point but want to point out that profit is still a function of the cost structure. Oil is a major cost component, ~35-40%. On this note, to be provocative, I am going to give a buy call on SIA.

Am I right that if on-wing maintenance is an issue it will show on the JV part of the PnL? I'm guessing analysts are lumping everything under MRO problem cause they are not as detailed as VBs .

To be provocative Do you think Cathay or Qantas or even China Eastern will do better than SIA since oil is also a major component? Point I'm trying to say is "find the alpha stock"

Generally, all these stocks will be positively affected by low oil prices. I dont think I have sufficient data to find THE alpha stock. But I think airline industry will be the alpha sector in the near future. But there is definitely uncertainty in the long term potential of this sector, as oil disruptions, global pandemic or fleet grounding, will impact the profitability significantly.

If I run SIA's fuel department, I will stop the fuel hedging strategy, and buy as many futures at  +10% of current fuel price as possible, and lock in the future cost structure.

4 years passed and both SIA and SIAE performance has been dismal, even after recent price move

Interesting no one mentioned about SIAE even after the spike.

CSL or anyone have thoughts or updates on SIAE if it has bottomed? On wing maintenance impact should be a thing of the past?

[karlmarx]

Always had one eye on SIAEC, but it was never cheaper enough for me. It came close though.

Line maintenance will continue grow, but with slightly smaller margins as Changi continues to compete for regional air traffic. This is the bright spot of SIAEC. The rest of the segments does not look good.

What was predicted here years ago on the cannibalization of the JVs on SIAEC's wholly-owned subsidiaries have largely come true. Although the JVs are growing, it is not enough to replace the losses at the wholly-owned subsidiaries. It looks like, over time, this will be the way things be. This same strategy by air frame and engine manufacturers to muscle in on the maintenance revenue is being replicated across the region with its various airline customers.

Although the region's air traffic will grow, SIAEC may not benefit from an increase in maintenance business, as the LCCs from Malaysia and Thailand are building their own MRO capabilities, including higher-margin engine maintenance. Given its political will and abundance of cheaper skilled-labour, Thailand has the potential to be a major regional MRO operator. If/when that happens, even SIAEC's JVs -- its other bright spot -- will suffer as it becomes hamstrung with higher labour cost.

In recent years, SIAEC has also been losing out to STA on several large contracts. What is going on with management?

Given the above, and the recent run-up in price, I've become less interested in SIAEC.

[blackclock]

The regional competition is getting more aggressive.

Airbus bought out Sepang Aircraft Engineering
https://www.airbus.com/newsroom/press-re...bsidi.html

Airbus is now competing directly with SIAEC. With cheaper labour & land cost, I don't see much upside in Singapore's MRO service.

Thailand expand aggressively into MRO. Singapore don't stand much chance.
http://interactive.aviationtoday.com/avi...lications/