The sky is falling for SIA Engineering Company as SIAEC share price crashed to $2.21, a 10-year low on 26 December 2018. The correction of SIAEC share price could be due to market anticipation of a set of poor third quarter FY2018/19 results. Following the release of the results, SIAEC share price recovered to the $2.50 bandwidth but started falling again in early 2019. On the basis of the recent volatility, I smell blood for SIAEC share price and investors should brace themselves for a roller-coaster ride.
Investing in SIAEC is not fun. If investors look back, SIAEC share price has suffered a horrendous bloodbath, falling from $5.00 in 2013 to the current $2.40. The drop of 50% in SIAEC share price within 6 years make this counter an awful falling star. Should investors hang on for their dear lives or hope for a privatization offer from parent company, Singapore Airlines? SIAEC share price in destructive mood
It had been woes after woes for investors as the dismal SIAEC share price performance saw it being booted out of the prestigious STI benchmark in 2017. Following that, SIAEC share price tanked after a surprise block sale by JP Morgan. SIAEC share price never recover from these setbacks.
How on earth did SIAEC come to such a sorry state is beyond my understanding. Watching the decline of SIAEC share price day by day must be a painful experience for investors. This is after all, one of the most established institutions in Singapore. As the leading MRO giant in the aviation hub of Singapore, SIAEC would have enjoyed an unassailable investment moat in this evergreen industry. If the culprit for the disastrous performance is due to technology disruptions or changing market trends, then shouldn’t the management be more proactive in devising strategies or solutions to tackle the headwinds and reverse the decline? For sure, this is easier said than done. But then again, every industry has its own challenges. Tell me which sector that has not been affected by changing market forces.
To make things worse, it appears to me that the management is in some sort of panic mode as it sold off several assets in recent months. In December 2018, SIAEC divested its Aircraft Maintenance Services Australia Pty Ltd for A$4.5 million. Then in January 2019, SIAEC disposed its 20% stake in Jamco Singapore for $3.97 million. These sales hardly inspire any sense of confidence of management staging a remarkable turnaround.
To be certain, it is not business as usual for the MRO stalwart as the entry of service of new aircraft like A350, B787, A320NEO and B737-MAX marked the start of the decline for SIAEC share price. These new aircraft require less maintenance checks and longer maintenance task intervals, especially in the first few years of entry into service. Arising from this new trend, the MRO sector in Singapore has seen a decline in business in recent years. This is because about 90 per cent of the local aerospace work is tied to aircraft maintenance and repairs.
Privatization on the card?
Against the challenging backdrop, the possibility of a privatization cannot [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
Not a member yet? You may sign up to become a member of SG Wealth Builder. The full benefits and privileges of SG Wealth Builder Membership:
- Access to the latest premium articles of SG Wealth Builder
- Email notifications of latest blog articles
- Bonus investment report on SGX stocks
- Access to Wealth Forum for investment ideas and discussion
- Request for coverage on stocks, insurance and other personal financial topics
- Comment in articles and Wealth Forum
- Future network opportunities
SG Wealth Builder Membership
You may sign up for the SG Wealth Builder Membership for only $15 per month. As a member, you can access all the articles, including the premium ones.
Note: After payment is made, you will be prompted with registration form to create your user-id and personal password.