SIAEC to focus on 3 areas to achieve business stability

See the company's near-term battle plan.

OCBC Investment Research revealed that SIAEC will continue efforts in marketing, improving productivity and controlling costs as it attempts to remain stable in the near term despite the tough operating environment.

Here's the full company analysis from OCBC:

1Q14 as anticipated. SIA Engineering Company's (SIAEC) 1Q14 results were generally in line with ours and the street's expectations. Basic EPS of 6.22 S cents formed 25% of ours and 24% of the street's FY14 estimates. Revenue decreased 3.7% YoY to S$289.4m, chiefly due to lower material and fleet management revenue. Operating profit fell 19.5% YoY to S$27.7m. Share of profits from associated and JV companies increased 14.0% YoY to S$45.6m, representing a contribution of 58.0% of the group's pre-tax profits. PATMI was down 1.6% YoY to S$69.0m.

Compression in operating margin. Salary costs increased 4.3% to S$128.7m. Overheads (depreciation, amortization of intangibles, company accommodation and other operating expenses) fell 2.4% to S$44.2m while subcontract services (-12.3% to S$32.7m) and material cost (-6.7% to S$56.1m) saw larger decreases. In sum, expenditure fell only 1.7% to S$261.7m and operating margin compressed to 9.6% in 1Q14 from 11.4% in 1Q13.

Business to remain stable. Management expects that the group's business will remain stable in the near term despite the challenging operating environment arising from uncertainties in the world economy. SIAEC will continue efforts in marketing, improving productivity and controlling costs. Its existing relationships with original equipment manufacturers position it for further growth in Asia.

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