SIA Engineering Company Limited (“SIAEC”) reported a 6.7% YoY decline in its 2QFY16 revenue to S$266.0m on lower contributions from airframe and component overhaul as well as its fleet management segments but offset by higher contribution from line maintenance segment. 2QFY16 share of profits from associated and JV companies also decreased 35.7% YoY to S$18.7m.

However, as 2QFY16 operating expenses fell by 11.3% YoY to S$239.0m on lower subcontract, staff and material costs, PATMI came in 5.7% YoY higher at S$44.5m. The lower operating costs resulted in a 10.5ppt improvement in its operating profit margin to 23.9%. For 1HFY16, revenue dropped 6.2% to S$543.3m on similar reasons as 2QFY16 and PATMI declined 10.3% YoY to S$85.8m, which formed only 44.5% of our FY16 forecasts. Pending management briefing later in the morning, we maintain our HOLD rating but place our FV of S$3.45 under review for now.

Source: OCBC Research - 3 Nov 2015