SIA Engineering Company Limited’s Latest Earnings: What Investors Should Know
Aircraft engineering outfit, SIA Engineering Company Limited (SGX: S59), released its first quarter earnings after the market closed yesterday. The reporting period was from 1 April 2017 to 30 June 2017.
SIA Engineering Company, or SIAEC, provides base and line maintenance of aircraft, and repair of aircraft components, among others. As of 1 June 2017, it was 77.7% owned by our flag carrier, Singapore Airlines Ltd (SGX: C6L).
With that, let’s have a brief glance at the latest financial numbers from SIAEC:
1. Revenue came in at S$272.8 million for the first quarter, inching up 0.4% as compared to the same quarter a year ago.
2. Share of profits of associated and joint venture companies went up 1.9% year-on-year to S$21.1 million. This was on the back of higher contributions from Eagle Services Asia Private Limited and other associated companies, offset by lower contributions from Singapore Aero Engine Services Pte Ltd, due to lower work content of engines shipped. SIAEC has 25 joint ventures and subsidiaries in over nine countries.
3. Net profit for the quarter nosedived 81.8% year-on-year to S$36.2 million. In the same quarter last year, profit was at S$198.4 million, as it included a gain from the divestment of SIAEC’s 10% stake in Hong Kong Aero Engine Services Ltd to Rolls-Royce Overseas Holdings Limited and Hong Kong Aircraft Engineering Company Limited. Without the impact of the divestment in the first quarter last year, profit for the latest quarter would have been 4.7% lower.
4. Consequently, basic earnings per share for the quarter came in at 3.24 cents, down from 17.67 cents seen in the previous corresponding quarter.
5. The firm has a robust balance sheet. As at 30 June 2017, it had a net cash position of SS$601.5 million, up from S$575.8 million, as at 31 March 2017.
6. SIAEC generated S$16.9 million in net cash from operations for the quarter, a decline from S$51.4 million seen a year ago.
In the first quarter, the firm announced that it had clinched an “in-principle agreement with GE Aviation to form an engine overhaul joint venture in Singapore”. This is SIAEC’s third engine overhaul facility, after having joint ventures with Pratt & Whitney and Rolls-Royce.
The firm provided the following outlook:
“The operating environment for the maintenance, repair and overhaul (MRO) industry remains challenging. Notwithstanding this, the Group has continued to pursue expansion opportunities for sustainable long-term growth…
We have also expanded our geographical network with the incorporation of a wholly-owned subsidiary in Osaka to provide line maintenance services at this key airport in Japan. The foregoing and other recent investments are not expected to be accretive in the near-term.
At the same time, the Company will continue with initiatives to increase productivity, enhance operational efficiencies and manage our costs to remain competitive.”
Shares of SIA Engineering closed at S$3.87 on Tuesday. This translates to a historical price-to-earnings ratio of 13 and a dividend yield of around 3%.