SIA Engineering Company

[Contrarian]

Traditionally the world has not been yield hungry. In an era of low rates, even a 4% is considered good :-)

[FFNow]

A look into Singapore's Aviation MRO industry and also SIAEC.

http://info.channelnewsasia.com/videopla...eymind.gif

[kbl]

hit $5.

Congrats to Musicwhiz san and all vested here.

not vested

[nitro]

any chartist to comment? time to take profits?

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[Trading Central] SIA Engineering: the RSI is overbought
Our pivot point is at 4.8.

Our preference: the upside prevails as long as 4.8 is support.

Alternative scenario: the downside breakout of 4.8 would call for 4.66 and 4.59.

Comment: the RSI is above 70. It could mean either that the stock is in a lasting uptrend or just overbought and therefore bound to correct (look for bearish divergence in this case). The MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at 4.62 and 4.45). SIA Engineering is currently trading near its 52 week high reached at 4.94 on 25/01/13.

[Contrarian]

If earnings hit 25cts as per 2 X H1, it means $5.10 is trading at 20X PE

IF dividend goes up to 21cts, dividend yield is 4.1% In a super low interest yield hungry environment, this is still good yield.

At $6, yield still a respectable 3.5%.

Should I believe chart or fundamentals? I also don't know...

[Temperament]

Have sold my last 2 lots @4.99 yesterday. caught by surprise price reached 5.10. May buy back some lots.

[Musicwhiz]

Not much to comment on, so I will just paste the links for the 3Q 2013 results here:-

http://info.sgx.com/webcoranncatth.nsf/V...900321616/$file/SIAENGCO3Q1213Announcement-SGX.pdf?openelement [Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...900321616/$file/SIAENGCO3Q1213NewsRelease-SGX.pdf?openelement [Press Release]

[Musicwhiz]

The Straits Times
www.straitstimes.com
Published on Feb 06, 2013
SIA Engineering third-quarter gains up at $67m
Year-on-year increase due mainly to lower spending even as revenues fall

By Karamjit Kaur Aviation Correspondent

THIRD-QUARTER net profits at SIA Engineering hit $67 million, 5.5 per cent higher than in the same quarter in 2011.

The increase in the bottom line, in the three months ended Dec 31, came mainly on the back of lower spending even as revenues fell, the firm said yesterday.

Total turnover slipped 8.3 per cent, or $25.2 million, year-on- year to $278.2 million while expenditure fell by 10.2 per cent, or $28 million, to $247 million. This was due in part to lower material costs and an exchange gain during the quarter.

More than half of its pre-tax profits came from associates and joint venture companies, the Singapore Airlines subsidiary said.

Basic earnings per share rose by 5 per cent from 5.79 cents a year earlier to 6.08 cents, while net asset value per share fell to $1.11 at the end of December compared with $1.14 as at March 31 last year. In a release yesterday, the aircraft repair and maintenance firm said its core business is expected to remain stable in the current January-March quarter.

While prevailing uncertainties in the world's major economies will continue to impact the aviation industry, SIA Engineering said it will continue to maintain its focus on cost control and productivity improvements.

Industry watchers said that despite some slowdown in the demand for global air travel, the aircraft repair and maintenance sector is expected to grow as more planes take to the skies.

Just last week, American aircraft engine maker Pratt & Whitney announced that it would start a new manufacturing facility in Singapore - its first outside the United States.

The plant, to be built at Seletar Aerospace Park, will produce fan blades and high pressure turbine discs for aircraft engines.

karam@sph.com.sg

[shanrui_91]

Previously, when we talk about MRO competition I will have only thought of China's low cost maintenance service. This will not have been of much threat for the A check, B check and maybe even c check since the distance is too far to make any economic saving.

I will never have thought of MRO in Batam which can be a much greater potential threat to SIA EC given that the distance is so near. They are more likely to capture the LCC pie if successful. They can also have a much lower cost structure since labour cost is a huge segment of cost. Of course, there's still a lot for them to prove themselves before they can be a formidable challenger, but i think it is something that investor in SIAEC should monitor closely. Most importantly, it will be how they will go about securing their skilled worker.

Eyeing a slice of aviation pie - out of Batam
BY jeffrey hutton In Jakarta
22 March 2013
Business Times Singapore
© 2013 Singapore Press Holdings Limited

Indonesian plane maintenance firm plans facility that's closer to Singapore

INDONESIAN airline catering and maintenance provider PT Cardig Aero Services (CAS) may challenge its business partner SIA Engineering for a piece of the jetliner-heavy maintenance business. This comes as the company seeks new sources of revenue as infrastructure bottlenecks at home put a squeeze on passenger growth.

CAS's chief executive officer and president Diono Nurjadin said the company has identified a potential site in Batam's Hang Nadim Airport with a 4km runway and a hangar that can take two single-aisle jet aircraft.

The site, just 30 minutes by ferry from Singapore and near Singapore-based engineers and parts manufacturers, together with its lower operations cost, make it ideal for no-frills carriers, said Mr Nurjadin.

He told The Business Times in an interview: "The venture is high-priority because we have the opportunity in Batam at the moment."

Talks with the airport authority, Angkasa Pura 1, are preliminary. "We're talking to the authority about the land. We're looking at an existing hangar that we'd like to acquire."

The move underscores the challenges which the rapid growth in airline traffic in Indonesia is posing for service-providers within the sector, such as CAS. Hemmed in by terminals and warehouses already operating well beyond their originally planned capacity, CAS must break into new businesses - even if it means taking on more established rivals such as SIA Engineering.

CAS is in a joint venture with SIA Engineering - PT JAS Aero Engineering - to offer technical services and aircraft line maintenance. CAS owns a 51 per cent stake in the venture, and SIA Engineering, the rest.

Some 70 per cent of domestic aircraft are serviced outside Indonesia.

Mr Nurjadin declined to say whether the new business is a direct challenge to SIA Engineering. He has little choice, he said: "Our limitations to growth are the same as the infrastructure. We don't want to build the infrastructure, but we would like to help manage the infrastructure to increase the traffic that goes through the airport."

Jakarta's main international airport, Soekarno-Hatta, is owned by state-owned Angkasa Pura II, which owns and runs airports in the west of the country. The facility is already handling more than double the 22 million passenger capacity for which it was built in the 1980s.

The Ministry of Transport said passenger traffic at Soekarno-Hatta topped 54 million last year. The operator kicked off its 7.6 trillion rupiah (S$980 million) expansion in August, aiming to lift capacity at Jakarta to about 62 million. But with monthly domestic passenger traffic growing at 16 per cent and the number of travellers headed overseas rising by 7.5 per cent a year, it will not be long before the hub will be at maximum capacity again.

CAS's strategy reflects the proliferation of low-cost carriers, the growth of which has been fed by the region's newly minted middle class who are getting a taste for travel; there has been an explosion of brands and aircraft in the low-cost segment, along with high-end travel.

Mr Nurjadin said: "Air travel is no longer a luxury. It's a necessity."

Most so-called "legacy carriers" in the region, such as Singapore Airlines and Qantas, have launched cheaper offshoots to compete with the likes of AirAsia and Lion Air.

Jakarta-based Lion Air expects to expand its fleet of single-aisle aircraft - the sort CAS may target - to 450 by 2026.

Low-cost carriers are expected to operate 1,000 aircraft in the Asia-Pacific within two years, making up a third of all jetliners flown in the area, said Bangkok-based Brendan Sobie, an analyst at the Centre for Aviation.

He said: "Recognising the growth in Asia travel demand, Asia's legacy carriers have adopted new multibrand strategies."

CAS stands to benefit from an influx of passengers, whether they are travelling on no-frills or full-service carriers, Mr Nurjadin said.

Shares of the company, which is 15 per cent publicly-owned, have almost doubled to 810 rupiah in the past year.

Mr Nurjadin said: "Business is very good now. Domestic travel is growing. Large legacy carriers are suffering because they are competing with the Middle East carriers.

"But the legacy carriers see Indonesia as an important market. It's not pilgrims and guest workers flying from here anymore. Now, it's also luxury travelers."

CAS has a 70 per cent share of the airline light maintenance and catering business, excluding the aircraft of the Garuda fleet. Garuda's PT Gapura Angkasa provides catering and maintenance for its parent's fleet.

CAS, which also operates lounges, check-in desks and cargo handling on behalf of every overseas airline flying into Jakarta, said it is under pressure to help Angkasa find new revenue streams as well. Under new legislation taking effect next year, the airport operator will lose millions from over-flight fees, which are the tariffs aircraft operators pay to fly through a country's airspace.

Mr Nurjadin said: "We have to help them make up that shortfall, or they may come after us to make up the difference."

[Musicwhiz]

Thanks Shanrui for posting this. Good to read something negative once in a while to counter-act the bullishness from analysts!

CAS is in a JV with SIAEC, though, and now they plan on competing with SIAEC? Haha sounds a bit strange. Anyway, I feel the pie may grow large enough for all players to benefit. Such "competition" may not necessarily erode market share for SIAEC; it would depend on the dynamics of the market.