SIA Engineering Company (SIAEC) reported a 7.4% YoY fall in revenue to S$256m and a 12.3% decrease in net profit to S$49.3m for 4QFY19, bringing full year net profit to S$160.9m (down 13.9% compared to FY18), which is just 2% higher than our full year forecast of S$158.2m. The lower revenue was mainly due to a decline in airframe and fleet management turnover.

Share of profits of associates and JVs increased by 3.7% to S$113.9m for the year. The MRO environment remains challenging. In addition, revenue will be impacted by the unforeseen grounding of customers’ aircraft. On its part, SIAEC’s transformation journey is gaining traction.

Pending an analyst briefing, we maintain our HOLD rating but put our fair value estimate of S$2.47 under review.

Source: OCBC Research - 13 May 2019