SIA Engineering poised for growth in 2013

Thanks to its growing non-SIA customer base.

According to Maybank Kim Eng, headlining SIE’s investment case is its relative value that has emerged within the aviation maintenance, repair and overhaul (MRO) sector. SIE currently trades at a lower PER of 16.7x versus its peer average of 18.8x, while dividend yield of ~5.1% is almost a full percentage point higher than its peer average of 4.2%.

Here's more from Maybank Kim Eng:

Sector outlook rosy, SIE well-poised to benefit. Industry forecasts for the aviation MRO sector are still showcasing steady growth especially in Asia. In addition, we favour SIE for its ability to grow its non-SIA customer base as an affirmation of its ability to gain traction from an increasing trend of outsourced MRO functions from other airlines. This allows SIE an enviable balance between a diversified customer base and a foundation to lean on: SIA’s MRO business.

Resilient business supports attractive yields. SIE’s record of profitability seems to corroborate the thesis of resilience within the aviation MRO sector. Even during times of global economic crises, SIE’s earnings remained stable and, together with strong cashflows, formed the basis of an increasing dividend payout trend.

Favoured play in aviation engineering: Reiterate BUY. We peg SIE’s valuation to 18.3x FY3/14 PER, one standard deviation above its historical mean. Our Target Price of SGD4.95 implies 15% total returns inclusive of a 5.1% dividend yield. SIE is now our pick in the aviation MRO sector based on its undemanding relative valuations. Reiterate BUY.

Reaching the people who run Asia's businesses is harder than it used to be.

Inboxes are crowded. Attention is short. The executives you most want to reach — the founders, CFOs, and operators who actually move budgets — are the hardest to find through the usual channels. If you're building a company, a category, or a reputation, you already know this.

We've spent twenty years building the room they read. Singapore Business Review is where senior decision makers in Singapore and across Southeast Asia come for business coverage they can't get elsewhere — in print, online, and in person at the summits and roundtables we host across seven markets.

If you have something these readers should know about — a point of view worth publishing, a product worth their attention, an event worth their time — we'd like to hear what you're trying to do.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia