SIA Engineering could declare 12 cents full-year dividend

Sale of its HAESL stake could provide an upside catalyst.

SIA Engineering (SIE) is expected to declare lower full-year dividend amidst bleak outlook on maintenance, repair and overhaul sector.

OCBC Investment Research lowered its top-line forecasts for the company by 6%/10% and core earnings by 18%/22% in FY17/FY18 to account for the weak outlook. Consequently, it now expects a 12Scts full-year dividend (excluding any potential special dividend) in FY17/18, translating to a c.91% payout ratio on core earnings, lower than its earlier estimates of 14-14.5Scts.

"We are currently expecting total dividends of 12Scts each in FY17/18 (lower than 14Scts for FY16), but SIE could choose to be more generous with special dividends arising from the proceeds of the sale of its 10% stake in HAESL," it said.

However, it cautioned that there is no certainty that this will result into a major special dividend at the end of FY17 as SIE's organic growth potential remains low and amidst challenging industry conditions, there could be multiple uses of cash including investments in widening strategic partnerships with OEMs.