SIA Engineering sitting pretty as aviation MRO sector performs solidly

SIE "well-poised to benefit" from mostly Asian-based growth.

Here's more from Maybank Kim Eng:

Sector outlook rosy, SIE well-poised to benefit. Industry forecasts for the aviation MRO sector are still showcasing steady growth especially in Asia. In addition, we favour SIE for its ability to continue growing its non-SIA customer base as an affirmation of its service quality. This allows SIE an enviable balance between a diversified customer base and a foundation to lean on: SIA’s MRO business.

Resilient business supports attractive yields. SIE’s record of profitability seems to corroborate the thesis of resilience within the aviation MRO sector. Even during times of global economic crises,SIE’s earnings remained stable and, together with strong cashflows, formed the basis of an increasing dividend payout trend. 

Favoured play in aviation engineering. We now peg SIE’s valuation based on 18.3x FY3/14 PER, one standard deviation above its historical mean. Target price is accordingly raised to SGD4.95, implying 15% upside with an attractive 5.3% dividend yield adding to its investment case. SIE is now our pick in the aviation MRO sector based on its undemanding relative valuations.