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The analysts’ upbeat outlook comes on the back of the company’s Q2 results, in which net profit is up 13.5% at S$40.4 million
[SINGAPORE] Analysts are turning bullish on SIA Engineering on the back of easing supply-chain constraints and new growth initiatives, with at least two brokerages upgrading their calls on the counter following the release of its first-half results.
CGS International (CGSI) on Thursday (Nov 6) upgraded its call on the counter to “add” from “reduce”. UOB KayHian also upgraded its call on the Singapore Airlines subsidiary to “buy”.
In CGSI’s analyst Raymond Yap’s report, he noted the rating upgrade comes as the outlook for the company has improved with the easing of constraints on parts and materials supply chains, which have enabled the company to raise its output of engines and component repairs.
Yap raised his target price on the counter to S$4 from S$3.10.
In its earnings for the quarter ended September, the maintenance, repair and overhaul (MRO) provider reported a 13.5 per cent rise in net profit to S$40.4 million for the period; this made for a core net profit of S$83.4 million for the first half of the year.
CGSI and UOB KayHian (UOBKH) deemed this “in line with expectations”; analysts from DBS assessed this to be “slightly ahead of expectations, supported by improved pricing and stronger associates”.
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Analysts noted that the profit growth was partly offset by a S$4 million impairment on an onerous contract and gestation costs from new expansion projects. Those gestation costs are, however, projected to taper off with stronger growth momentum.
CGSI’s Yap noted these expansion costs relate to SIA Engineering’s new line maintenance business in Cambodia and its new Base Maintenance Malaysia (BMM) venture, but viewed them as “investments for long-term growth in a global MRO market that continues to experience robust demand”.
UOB KayHian analyst Roy Chen said: “Management has observed a notable improvement in spare parts supply in H1 FY2026 … and expect this improving trend to continue into FY2027; this should support SIA Engineering’s earnings outlook.”
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Chen raised his target price to S$3.92 from S$3.41, noting that the earnings uplift from the improvement in the supply chain could “largely mitigate” the drag from near-term gestation costs.
Analysts are focused on these new growth initiatives. CGSI noted that the BMM venture would start operations by December 2025 and could increase the company’s heavy-maintenance capacity by approximately 40 per cent once its second hangar is running.
DBS analyst Jason Sum, who maintained his “buy” call, cited the development of new engine and component capabilities, the ramp-up of the base maintenance of its facility in Subang, and the new MRO joint ventures in Malaysia and Cambodia as key drivers for medium-term earnings.
He noted the group’s significant financial flexibility, given its “robust net cash position” of S$485 million; this liquidity, he said, provides room to enhance shareholder returns through higher dividends or buybacks, supporting long-term value creation.
“The street continues to underestimate SIA Engineering’s medium-term earnings potential,” Sum said. He raised his target price to S$4.00 from S$3.50.
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