Is relief on its way for ST Engineering’s ailing aerospace MRO business?

An anticipated stronger 2H didn’t materialise for STE.

The integrated engineering group may be stuck to its weak aerospace MRO business and shipbuilding for the long haul, after expectations of a turnaround in the second half of 2015 vanished into thin air.

However, analysts are saying the firm might have overlooked a key growth driver that may be exactly what the doctor ordered for its struggling maintenance workloads.

According to analysts from Maybank Kim Eng, new reports point towards a smaller EPS rebound next year, but a surge in aircraft maintenance workload may be brewing.

“Airlines are likely to increase capacity in response to lower oil prices and slow down their fleet retirement. These should drive a pick-up in maintenance workloads,” Maybank Kim Eng said.

Despite this, Maybank Kim Eng says ST Engineering should not overlook dealing with its disappointing marine division.

“Marine could stay weak [due to] lower marine contributions given a lack of new orders. Margins have also been cut across the board as cost pressure persists,” Maybank Kim Eng said.