<Earnings First Take!> SIA Engineering Company (SIE SP): 4QFY22 results largely in-line with expectations
- 4QFY22 net profit came in at S$9.4m (-71.6% q-o-q, +930% y-o-y), bringing FY22 net profit to S$67.6m, falling short of consensus’ full-year estimate of S$70.4m by 3.9%.
- 4QFY22 revenue amounted to S$162.6m (+16.1% q-o-q, +40.9% y-o-y), with full-year revenue at S$566.1m, which was marginally above the street’s estimate.
- Share of profits from associates and JVs was at S$12.2m in 4QFY22, largely on-par with the S$12-15m run rate in previous quarters.
- Net cash position rose slightly to S$622.7m as of Mar-22, as compared to S$606.1m in Mar-21.
- No final dividend was declared.
- We currently have a BUY call and TP of S$2.65 on the counter, more updates to follow after the analyst briefing.
Our thoughts:
- The turnaround in SIE’s core operations is largely within expectations – the number of flights handled in Singapore reached 38% in Mar-22, the highest since the pandemic began. Recovery should gain more momentum in the near-term as more countries make further progress on reopening. Key customer SIA expects its capacity to reach 61% of pre-pandemic levels by June-2022.
- Accordingly, we expect SIE to turn profitable in 2HFY23 on an EBIT basis on greater work volumes and economies of scale (SIE booked an operating loss of S$7.3m in 4QFY22 vs S$7.8m in 3QFY22).
- Core net losses likely shrank to around S$4-5m in 4QFY22, a slight improvement from a core net loss of S$7.0m in 3QFY22.
- The recently announced aviation resilience package will extend 10% wage support for another six months until September-2022, consistent with the level in January to March-2022, and will help buffer margin pressure amid an inflationary environment.
- SIE’s net cash balance actually grew over the course of COVID-19. The company has been cautious and prudent thus far in capital management, and has only undertaken bolt-on acquisitions and partnerships, but we could see its earnings recovery accelerate if attractive M&A opportunities arise.
- More updates to follow after the analyst briefing in the morning.
Operational Statistics
1QFY21 | 2QFY21 | 3QFY21 | 4QFY21 | 1QFY22 | 2QFY22 | 3QFY22 | 4QFY22 | y-o-y | q-o-q | |
Flights handled at Changi Airport by line maintenance | 4,952 | 6,320 | 7,807 | 8,648 | 9,755 | 10,990 | 12,860 | 14,280 | +65.1% | +11.0% |
Number of heavy checks performed at Singapore base | 15 | 9 | 16 | 20 | 21 | 25 | 25 | 22 | +10.0% | -12.0% |
Number of light checks performed at Singapore base | 54 | 55 | 53 | 61 | 85 | 77 | 92 | 94 | +54.1% | +2.1% |
Fleet size managed by fleet management business | 86 | 82 | 79 | 80 | 79 | 77 | 76 | 95 | nm | nm |