Broker: UOB Kay Hian
Date of Report: 24 July 2026
Excerpt from UOB Kay Hian report.
Report Summary
Stock Focus: SIA Engineering (SIE SP)
- Action: BUY (Maintained)
- Target Price: S\$3.75 (previous S\$3.85)
- Upside Potential: 14.7% (current share price S\$3.27)
- Yield: 3.5-4.0% for FY27-28
Key Ideas:
- Underlying business fundamentals remain strong, though near-term earnings are impacted by gestation costs from expansion at engine JVs. Excluding these costs, earnings would have grown about 10% year-on-year.
- Positive business developments: formation of a new engine MRO JV with Safran (for LEAP engines) and a signed MOU with Air India to explore a potential MRO JV in India. These initiatives are seen as meaningful mid- to long-term growth drivers.
- Healthy balance sheet with net cash position of S\$628m, approximately 17% of market cap.
- Management remains confident in Asia-Pacific MRO market fundamentals, supported by rising passenger traffic and fleet expansion.
Implications:
- Investors are advised to look beyond near-term earnings volatility and stay invested for medium-term growth, with SIA Engineering positioned to benefit from industry tailwinds and its strategic expansion.
- Minor revision: FY27/28 earnings trimmed due to fine-tuned gestation cost projections. Key risks include margin pressure from labour and raw material cost inflation, and execution risks related to overseas expansion.
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