What is the news?

Despite an 8% decline in sales, net Income for SIAEC increased by 5.5% to S$67.0mn. Operating profits for the company improved by 9.9% due to improved profitability. Profit contributions from the JVs with Rolls Royce increased by 22%y-y. However, contributions from other Associates declined, as we suspect that there could be losses at some units that affected the consolidated profits of other Associates. Dividend contribution from HAESL was up 33%. Management continues to guide for stable outlook at its core business in 4QFY13E, but cautioned that economic uncertainties will continue to impact the aviation industry.

How do we view this?

The results were in line with our expectations. We estimated that variable cost margins have improved and fixed cost items have remained stable.

Investment Actions?

We stay positive on the stock of SIAEC and roll forward our DCF valuation basis to FY14E. At the current price, the stock yields an attractive 4.4% with our full year DPS forecast of S$0.22 a share and would continue to be a beneficiary of investor interest in dividend yielding stocks. SIAEC continues to be on our top pick list for the Singapore Market. Maintain Buy (Target Price: $6.10).

Source: PhillipCapital Research - 6 Feb 2013