SIA Engineering Company's (SIAEC) 2Q14 results were in line with ours and the street's expectations. 1H14 basic EPS of 12.60 S cents formed 50% of ours and 49% of the street's prior FY14 estimates. 2Q14 revenue rose 3.3% YoY to S$293.9m, chiefly due to an increase in airframe and component overhaul work. Operating profit contracted 9.8% YoY to S$28.5m due to higher staff and subcontract services costs. Share of profits from associated and JV companies also expanded 25.0% YoY to S$48.5m. 2Q14 PATMI thus rose 5.8% YoY to S$71.0m. However, we note that 1H14 PATMI and basic EPS are only up 2.0% and 1.0% respectively. Making slight adjustments to our model, we raise our FV from S$5.00 to S$5.14 (based on EPS forecast of 25.7 S cents for FY14 and the same 20.0x peg). Maintain HOLD on SIAEC.
No surprises in 2Q14
SIA Engineering Company's (SIAEC) 2Q14 results were in line with ours and the street's expectations. 1H14 basic EPS of 12.60 S cents formed 50% of ours and 49% of the street's prior FY14 estimates. 2Q14 revenue rose 3.3% YoY to S$293.9m, chiefly due to an increase in airframe and component overhaul work. Operating profit contracted 9.8% YoY to S$28.5m due to higher staff and subcontract services costs. Operating profit margin at 9.7% was similar to the 9.6% clocked in 1Q14. Share of profits from associated and JV companies expanded 25.0% YoY to S$48.5m, representing a contribution of 60.0% of the group's pre-tax profits. 2Q14 PATMI thus rose 5.8% YoY to S$71.0m. However, we note that 1H14 PATMI and basic EPS are only up 2.0% and 1.0% at S$140.0m and 12.60 S cents respectively. The company has declared an interim dividend of 7 S cents per share, the same as last year.
37% of SIAEC’s 1H14 revenue is non-SIA
For 1H14, 63% of SIAEC’s revenue came from Repair & Overhaul, with the remainder from Line Maintenance. This is comparable with 1H13, when Repair & Overhaul accounted for 65% of revenue. Operating profit margin for Repair & Overhaul fell from 5.5% in 1H13 to 4.1%, while the margin for Line Maintenance declined from 21.8% last year to 19.0% in 1H14. For 1H14, the percentage of non-SIA work for SIAEC, its subsidiary companies and its JVs and associated companies are as follows: 37%, 64% and 69%. On a combined revenue basis, non-SIA work is 63%.
Business to remain stable
Management expects that the group's business will remain stable despite the challenging operating environment arising from uncertainties in the world economy. SIAEC will continue focusing on improving productivity and minimizing costs.
Maintain HOLD
Making slight adjustments to our model, we raise our FV from S$5.00 to S$5.14 (based on EPS forecast of 25.7 S cents for FY14 and the same 20.0x peg). Maintain HOLD on SIAEC.
SIA Engineering Company's (SIAEC) 2Q14 results were in line with ours and the street's expectations. 1H14 basic EPS of 12.60 S cents formed 50% of ours and 49% of the street's prior FY14 estimates. 2Q14 revenue rose 3.3% YoY to S$293.9m, chiefly due to an increase in airframe and component overhaul work. Operating profit contracted 9.8% YoY to S$28.5m due to higher staff and subcontract services costs. Operating profit margin at 9.7% was similar to the 9.6% clocked in 1Q14. Share of profits from associated and JV companies expanded 25.0% YoY to S$48.5m, representing a contribution of 60.0% of the group's pre-tax profits. 2Q14 PATMI thus rose 5.8% YoY to S$71.0m. However, we note that 1H14 PATMI and basic EPS are only up 2.0% and 1.0% at S$140.0m and 12.60 S cents respectively. The company has declared an interim dividend of 7 S cents per share, the same as last year.
37% of SIAEC’s 1H14 revenue is non-SIA
For 1H14, 63% of SIAEC’s revenue came from Repair & Overhaul, with the remainder from Line Maintenance. This is comparable with 1H13, when Repair & Overhaul accounted for 65% of revenue. Operating profit margin for Repair & Overhaul fell from 5.5% in 1H13 to 4.1%, while the margin for Line Maintenance declined from 21.8% last year to 19.0% in 1H14. For 1H14, the percentage of non-SIA work for SIAEC, its subsidiary companies and its JVs and associated companies are as follows: 37%, 64% and 69%. On a combined revenue basis, non-SIA work is 63%.
Business to remain stable
Management expects that the group's business will remain stable despite the challenging operating environment arising from uncertainties in the world economy. SIAEC will continue focusing on improving productivity and minimizing costs.
Maintain HOLD
Making slight adjustments to our model, we raise our FV from S$5.00 to S$5.14 (based on EPS forecast of 25.7 S cents for FY14 and the same 20.0x peg). Maintain HOLD on SIAEC.
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