SINGAPORE (July 3): SIA Engineering Co, the 77.5%-owned sub sidiary of flag carrier Singapore Airlines, is rewarding shareholders with a final payout of 14 cents. This brings its full-year payout to 18 cents for FY2017 ended March 31, up four cents from the previous year.
The counter will go ex-dividend on July 25. And the final and special dividends of nine cents and five cents, respectively, will be paid on Aug 8. Based on its June 27 closing price of $4.17, SIA Engineering’s final payout translates into a yield of 3.11%. That compares favourably with the yield of its parent, SIA, where dividends were recently cut from 45 cents to 20 cents for the full year. SIA now has a yield of 1.99%, based on its closing price of $10.09.
Shares in SIA Engineering have gained 23.76% year to date, as earnings have improved. For FY2017, the company reported earnings of $332.4 million, up from $176.6 million. The bottom line was lifted largely by a one-off gain of $141.6 million from an earlier sale of a 10% stake in a Hong Kong-based associate. Following the sale, SIA Engineering also received a special dividend of $36.4 million. That brought its total one-off gain for the recent financial year to $178 million. Revenue, however, was down 0.8% to $1.1 billion. The company warns of uncertainties and challenges from excess capacity and “aggressive pricing”.
Nevertheless, SIA Engineering sees growth opportunities, which it plans to grab via strategic partnerships. Just over the last month, the company inked three such partnerships with key players in the aviation sector.
On June 21, SIA Engineering and The Boeing Co signed a memorandum of agreement to jointly provide aircraft maintenance training services on current and new-generation aircraft types, including the Next-Generation 737, 777 and 787.
In addition, both parties will jointly evaluate a collaboration for SIA Engineering to provide aircraft maintenance training services on behalf of Boeing to airlines located in and around the high-growth Southeast Asian region. “This collaboration builds on both parties’ training networks, resources and extensive experience in delivering high standards of maintenance training on the latest aircraft types,” states SIA Engineering.
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Just one day before this announcement with Boeing, SIA Engineering and GE Aviation, a subsidiary of US conglomerate The General Electric Co, announced an agreement to set up a new engine overhaul joint venture. The JV, which is 51%- and 49%-held by GE Aviation and SIA Engineering, respectively, will be based in Singapore. When ready, it will provide a full range of engine maintenance, repair and overhaul (MRO) services for GE Aviation’s GE90 engine, which is used to power the Boeing 777-300ER and 777-200LR — two common aircraft types used by airlines, including SIA. The venture also covers similar services for GE Aviation’s GE9X engines, said to be the only engine type used by the new-generation Boeing 777X aircraft.
This venture, which will incorporate GE’s advanced manufacturing technologies and processes, is underpinned by SIA’s announcement in February of its intention to buy 39 Boeing wide-body aircraft valued at $13.8 billion. The purchase includes 20 777-9s powered by GE9X engines. In addition, SIA is also a major operator of GE90-powered 777-300ERs.
On June 19, Eagle Services Asia (ESA), a JV between SIA Engineering and Pratt & Whitney, was selected as an MRO facility in Singapore for PW1100G-JM PurePower Geared Turbofan engines. This engine type is one of the two used to power the new-generation A320neo aircraft.
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ESA has a commitment to invest US$85 million ($118 million) to equip the facility with advanced capabilities, such as an environment control system and an engine flow line system. Pratt & Whitney is a subsidiary of American conglomerate United Technologies.
On May 24, SIA Engineering announced the expansion of its regional footprint with the esta blishment of a wholly-owned unit to be based in Japan. This subsidiary will provide line maintenance services at airports there and start ope rations at Kansai International Airport, which serves Osaka, Japan’s second- largest city. Further expansion elsewhere in that country is planned. The Japanese unit will bring SIA Engineering’s regional network to 37 airports in eight countries. Besides Singapore and Japan, the other countries are Australia, Hong Kong, Indonesia, the Philippines, the US and Vietnam.
SIA Engineering has been actively buying back its own shares. The most recent purchase was on June 23, when it bought 78,200 shares at prices ranging from $4.16 to $4.18 each.
