SIA Engineering’s dividends at risk as cash balance crashes to record low

The firm will be loss-making for more quarters to come.

SIA Engineering’s shareholders should brace for lower dividends as the firm’s cash balance has shrunk to a new low in the third quarter.

A report by CIMB stated that SIAEC’s cash balance now stands at $365m, considerably lower than its historical average of around $500m.

High labor costs and its weak operating environment will also weigh on SIAEC’s performance. The firm is expected to be loss-making for more quarters to come.

“Although management hinted that its dividend payout is likely to sustain in FY15-17 (as long as cash levels remain strong), we believe there is a risk of lower dividends given the sharp earnings decline. Its cash balance dropped significantly to S$365m in 9MFY15 vs.S$536m in 9MFY14. We maintain our 90% payout forecast for now,” stated CIMB.