Date: 26 September 2024
Broker Name: Lim & Tan Securities Pte Ltd

Embraer Authorised Service Centre in Asia-Pacific

SIA Engineering Company Limited (SIAEC) reported that its subsidiary, SIA Engineering Philippines (SIAEP), has become the first Embraer Authorised Service Centre in the Asia-Pacific region. The company is now able to perform maintenance, repair, and overhaul services for Embraer’s E-Jets E2 family of aircraft. SIAEP has been an authorised service centre for Embraer’s first-generation E-Jets since 2017, with three hangars located in Clark, Philippines.

Strategic Importance of the Partnership

Frank Stevens, Vice President of Global MRO Centres for Embraer Services & Support, commented on the partnership, stating that SIAEP has been a key partner for Embraer in the region over the past few years. This new agreement strengthens the long-term partnership as the E2 fleet grows, further establishing SIAEP’s strategic importance to Embraer in the region.

Growth of Embraer’s E-Jets in Asia-Pacific

The partnership is timely as Embraer continues to expand its footprint in the Asia-Pacific region. Embraer’s E-Jets, which include both first-generation and E2 models, are being operated by airlines in several countries, including Singapore, Australia, India, Myanmar, Japan, and China. Scoot, a subsidiary of Singapore Airlines (SIA), has firm orders for nine E190-E2 jets, with two already in operation since May 2024. Scoot is the first E-Jet E2 operator in Southeast Asia, while Virgin Australia has also announced a firm order for eight E190-E2 jets, with deliveries starting in the second half of 2025.

Eaton Aerospace Joint Venture

SIA Engineering also announced a joint venture with Eaton, an intelligent power management company. The new entity, Eaton Aerospace Component Services Asia Sdn. Bhd. (EAS), will focus on inspecting, testing, repairing, maintaining, modifying, and overhauling Eaton-manufactured aircraft components. These components include airframe and engine fuel systems as well as hydraulic systems. EAS is expected to become fully operational within the next 18 months, based in Shah Alam, Selangor, Malaysia.

Eaton Aero Services Branding

The joint venture, branded as “Eaton Aero Services,” symbolizes the partnership between two industry leaders, aiming to provide reliable, customer-focused solutions in the Asia-Pacific region. The groundbreaking ceremony for the new facility took place on September 23, 2024. Representatives from the Malaysian Investment Development Authority (MIDA) and other industry stakeholders attended the event to commemorate this milestone.

SIA Engineering’s Market Position

Lim & Tan Securities views SIA Engineering positively, highlighting the company’s move up the technical value chain and expansion of its addressable market. Continued share buybacks are also expected to limit downside risks. SIA Engineering’s market capitalization stands at S$2.7 billion, with the stock currently trading at 18x forward PE and offering a dividend yield of 3.4%. The consensus target price for the stock is S$2.68, representing a 13% upside from its current share price. Lim & Tan Securities maintains an “Accumulate” rating for SIA Engineering.