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Investor CentralSIA Engineering Corporation Ltd - Can JVs make up for big rise in staff costs – which of the brokers is right?
3/9/2013 – SIA Engineering Corporation posted a weak Q1 performance over which analysts are sharply divided in opinion.
The debate is whether there are parts of the business that have been overlooked, such as its joint venture with Rolls Royce, or whether rising operating costs, particularly pertaining to staff, will nix any increase in earnings.
The company's Q1FY14 financials published on July 22 looked like this:
Revenue: -3.7% to S$289.4 mln
Net Profit: -0.9% to S$70.4 mln
Cash flow from operations: S$55.7 mln vs S$53.9 mln
Cash Reserves: S$628.7 mln vs S$574.5 mln
The Group posted a revenue decrease as a result of lower material and fleet management revenue.
Expenditure fell mainly from decreases in subcontract and material costs.
Analysts surveyed by Reuters have an average OUTPERFORM call with a price target of S$5.10.
Bullish analyst report
Maybank Kim Eng Research is upbeat, with its expectations having been met.
It says the market has not fully appreciated the hidden value in the joint venture with Rolls Royce, which is expected to gain from the entry of Trent engines to the market.
1. What is the vision for the Joint Ventures? Will there be any increase in stakes?
It also thinks the company has a good financial standing which means larger dividends for investors.
(Total 3 questions, plus bearish reports)
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