SIA Engineering seeking out investment opportunities abroad, likely to acquire control of JVs

SIA Engineering has made a shift in its investment strategy, going beyond Singapore to seek out opportunities as well as being more likely to acquire control of joint ventures (JVs).

Ng Chin Hwee, chief executive of the mainboard-listed aviation maintenance, repair and operations service provider, talked about these changes during an analyst call on Wednesday following the release of its results the day before for financial year 2021.

He cited the example of SRT Technics Malaysia, for which SIA Engineering is conducting due diligence for potential acquisition. It will be majority-owned, and therefore the control and management will be in the hands of SIA Engineering, if the transaction goes through.

SRT provides component repair, testing and overhaul services with a focus on the Airbus A320, A330, A340 and the Boeing 737NG aircraft, serving a diversified global customer base. It has sizeable capabilities for the narrowbody, the present preferred aircraft type in operation given the low demand for travel now.

SIA Engineering swung into a loss of S$11.2 million for the financial year to March, from a net profit of S$193.8 million previously, as demand was hit when its customers were impacted by the pandemic. Revenue shrank by 55.4 per cent to S$443 million.

Noting that this downturn has brought about structural changes in the industry, such as cuts in expenditure arising from early retirement of older aircraft, Mr Ng said SIA Engineering is seeking opportunities to strengthen and reshape its portfolio to tackle the challenges.

SIA Engineering intends to expand the engine services business as it reshapes its portfolio, as Mr Ng said its partnership with other players will only do well if it is also actively engaged in the engine services space that will help bring better value propositions to its engine and airline customers.

He also pointed out that the firm is one of few that have JVs with leading jet engine makers Rolls-Royce, Pratt & Whitney and GE Aviation.

It also has acquired the remaining stakes in some JVs in the past financial year as it rationalises its portfolio. It made Heavy Maintenance Singapore Services a wholly-owned subsidiary, for example, by buying out the 35 per cent interest from Airbus Services Asia Pacific.

Acquisitions and staff upskilling will be made to position the engineering group for post-pandemic recovery, even as it exercises a strict cost discipline and has also declared no dividends for the financial year 2021.

"It doesn't mean that we behave like an ostrich sticking his head into the sand. We intend to continue to upskill our staff, reskilling them, so they can be ready for the recovery, " explained Mr Ng.

SIA Engineering shares closed at S$2.20 or 2.66 per cent lower on Wednesday.