MAYBANK KIM ENG 20/8/2014
SIAEC (SELL, TP SGD4.20)
Earnings propeller to reverse gear
Investment thesis:SIAEC faces persistent weakness at its Rolls Royce engine JVs.
A smaller heavy maintenance workload as it expands capacity should also affect profitability.
With EPS set to fall by 12% in FY3/15E, we
expect a lower DPS of 21 SGD cts (FY3/14: 25 SGD cts).
Valuation:
Our TP of SGD4.20 is based on 20x FY3/15E P/E, 1 SD above its
10 year average. This is , again, justified by its positive long
term outlook.
Potential de-rating catalysts:
1) weak flight traffic at Changi Airport
2) fewer shop visits at its Rolls Royce engine JVs and
3) cuts in DPS
Plunge today. What's support price?
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