SIA Engineering to scrape 5-6% growth in next two years

Why is a crash and burn not yet in the cards for this aircraft services company?

Aircraft movements in Singapore are defiantly beating slowdown forecasts and the firm's management, according to DBS in its profit results comments.

Still, this didn't prevent the brokerage firm from slashing EPS estimates for SIA Engineering by a scathing 2-3% until 2013.

Here's more from DBS:

Steady growth and dividends. The risks of slower global economic growth and high fuel costs continue to weigh on the airline industry in 2012. However, we do not see any alarming signs yet and most carriers in the Asia-Pacific region continue to add capacity.

Aircraft movements at the Singapore’s Changi Airport continue to hit new records (14.5% growth during 2011) and SIE management believes MRO demand is sustainable in the near term. However, we are more cautious on margins, and cut our FY12/13 EPS estimates by 2/3%. We now expect SIE to record steady 5-6% growth in FY12/13.

Balance sheet remains strong though, and SIE ended the quarter with S$388m net cash. We estimate 20 Scts total dividend for FY12 (including 6Scts interim), which implies a yield of ~6% at current prices. SIE has underperformed the recent beta stocks rally in the STI. Return of macro uncertainty in the market may trigger interest in the stock again. Maintain BUY; TP revised down to S$4.20.