SIA Engineering's earnings to slump in the next two years

It has recorded a 19% profit decline in Q2.

After it registered a 19% profit slump in Q2 to $36.8m, SIA Engineering might not see recovery for the next two years, a report by UOB KayHian said.

The report noted that its JVs with Airbus and Boeing highlight its relatively weak bargaining position, as part of the existing Maintenance, repair, and operations (MRO) work will be shared with the two original equipment manufacturer (OEM).

"The greater reliance on OEMs for airframe MRO and fleet management is a cause for concern rather than a reason to be optimistic, at least over the next two years. Until we see a greater quantum of third-party work, we see no reason to stay invested," the brokerage firm stated.

Meanwhile, UOB also pointed out that the 9% decline in the group's operating profit was due to higher losess at the repair and overhaul segment and lower profitability of line maintenance segment.

"Losses at the repair and overhaul segment rose 30% yoy, despite higher checks. Line maintenance profits fell 3% yoy as margins fell 1.3ppt," the firm stressed, noting that the line maintenance segment will still be the main profit driver.