I'm surprised they are paying dividends. There is hardly any business for aerospace MRO activities and the prudent thing to do is to conserve cash.
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(09-05-2020, 12:25 PM)vingaard Wrote: [ -> ]I'm surprised they are paying dividends. There is hardly any business for aerospace MRO activities and the prudent thing to do is to conserve cash.
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Not surprising at all to me!
With total cash of $520m and negligible debt, SIAEC is well-positioned to ride out this unprecedented crisis much better than its key customer (SIA) and weaker sibling (SATS). It is now trading at $1.80, near to its all time lows during GFC and slight premium to book value of $1.45.
I guess the company is cognizant of paying out dividends based on last financial year's revenues (rightly so to the delight of loyal shareholders) and with the financial strength of its key customer bolstered by the recent rights issue with strong support by Temasek. The parent also probably need pocket $$ from the child regularly
.
The impact to line maintenance revenue is expected as guided by key customers. Even when planes are parked, they need to be maintained regularly whether it is parked at Changi (173 planes) or Alice Springs (17), assuming only 10 planes out of 200 are operational. There are regular checks and operational servicing to be done to make sure that all the planes are ready to fly again swiftly once demand returns. Domestic passenger travel is already increasing with the lifting of lock-down status by many countries.....hopefully international travel follows sooner than later. Cargo flights remain strong, in fact even increasing.
(Take a look at Etihad:
https://twitter.com/etihad/status/124863...39936?s=20)
Hope to redeem my KrisFlyer miles soon by end of the year
!
(09-05-2020, 12:25 PM)vingaard Wrote: [ -> ]I'm surprised they are paying dividends. There is hardly any business for aerospace MRO activities and the prudent thing to do is to conserve cash.
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Why would one be surprised? Abeit this FY20 dividend is lower than FY19, despite having higher net profit and comparable FCF in FY20.
- SIAEC has a pretty unlevered balance sheet through out the years, giving it the financial flexibility to leverage up if it wishes to. Compare this with the REITS whom many have utilized leverage for growth over the years and hence close to their allowable gearing limits, with much less flexibility.
- SIAEC's dividend payout ratio has been hovering at slightly less than 80% in the last 4 FY - This supports their cash balances and is a ready kitty for a rainy day. Contrast this with REITs which have to pay out at least 90% of their earnings for tax free status. REITS don't save for a rainy day (and it is raining now).
- But the most important reason is SIAEC's parent, whom owns 77% of SIAEC. Sometimes, if parent is in need of cash, it will have to ensure its subsidiary pays upwards, else the cash is trapped in the subsidiary and will not help the parent (holding company) even though the cash appears on the parent's balance sheet. Since parent SIA just recently concluded a 15bil cash call, I reckon it is in need of money even though the 5cents/share dividend from SIAEC "only" translates to ~43.5mil cash. I guess every single bit helps. Talking about parent-child relationship, the other subsidiary SATS had been spinned out to SIA's shareholders much earlier. Temasek, rather than SIA is the major shareholder now. So SATS shareholders might not be so "fortunate" in terms of coming FY20 dividends..
FY2020 results:
https://www.siaec.com.sg/pdf/Financial_R...h_2020.pdf
CNBC recently has a video about airlines parking thousands of planes. It includes brief information on what parking planes entail including the required maintenance.
Those interested can take a look.
Today's share price of $2.20 represents an increase of 48.6% since the lowest price of $1.48 on 23 March 2020. Still cheap in my opinion.
Price increase for the past few days have been outpacing SATS, is something brewing?
We will find out later....hmm
https://links.sgx.com/1.0.0/corporate-an...b8a7db6b54
5 June 2020 Reply to sgx - SIA Engineering
https://links.sgx.com/FileOpen/SGXNET_20...eID=615552
There has been recent improvement in general market sentiments for the aviation industry arising from the gradual reopening of borders and announcements of partial restoration of flights.
Furthermore, in the Fortitude Budget, the Singapore government is also providing additional support for the aerospace (including MRO) industry. Apart from the foregoing, the Company is not aware of any other possible explanation for the trading.
Stay home and stay safe, valuebuddies.
