SIA Engineering's engine repair revenue growth hit 5-year high

It rose by 28% within the second half of the year.

SIA Engineering Company (SIAEC) has plans to bolster its line maintenance as it was the most profitable segment in the company, UOB Kay Hian said in a report covering the company's analyst briefing.

UOBKH analyst K Ajith noted that engine overhaul and component revenue rose at the fastest rate (+28% YoY) in more than five years. "Profits from engine overhaul (excluding component) rose 29% YoY in 2018. SIAEC changed the reporting classification for the segment, breaking it up to engine repair and component sales, thus we are unable to accurately access profit growth for the engine segment in 2H2018," Ajith added.

SIAEC has expanded its line maintenance business to 39 airports in eight countries and is seeking to increase this further as this segment remains the most profitable. "SIAEC also aims to shift focus to producing and maintaining cabin interiors as new models of aircraft are built to have lower servicing needs. The company has formed a JV with Stratasys, a leading 3D printing and additive manufacturing firm," he said.

Still, UOBKH said their thesis that engine shop visits are rising appears to be validated.

Moreover, SIAEC expects higher Trent 1000 shop visits in 2019. "Rolls Royce Trent 1000 engines have been plagued by corrosion on the Trent 1000 fan blades and SIAEC expects to see greater number of work from its JV partner, SAESL. Thus, we expect the segment to be the key earnings driver for 2019," Ajith concluded.

SIAEC's full-year profits crashed 44.61% from $332.4m to $184.1m as it sold its 10% stake in Hong Kong Aero Engine Services Ltd (HAESL) to Rolls-Royce Overseas Holdings Limited (RROH) and Hong Kong Aircraft Engineering Company Limited (HAECO).