Tuesday, May 27, 2014

Review on SIA Engineering

SIA Engineering

Ever since I had my kid, I realised that I just don't have enough time to monitor my shares actively. That's why I have decided to go more into blue chips as opposed to capital plays. 

After divesting my interest in Nam Cheong, I decided to use the proceeds to invest in SIA Engineering instead. 

 (image from: http://sgmusicwhiz.blogspot.sg/2011/11/sia-engineering-1h-fy-2012-analysis.html) 

From a macro point of view, the market for air travel is booming. We received a record 15.5 m visitors to Singapore in 2013. With the increase in budget airlines, I can only foresee an increase in overhaul and repair services and that is where SIA Engineering comes in. 

Although the profits has dipped slightly, I remain confident that this would not be an issue. Every industry is going to face this manpower issue with the tightening of foreign labour. 

Numbers which i like about this blue chip play:
1. Good cash flow. They have 14.78 m in cash v the total debt (both short and long term) of 21.80 m. No worries about interest rates rising. 
2. Great dividends. Dividend yield is at 4.4% and this company has been known for giving good dividends even when the going gets tough. 

Neutral stuff:
1. EPS at 0.24 - kinda low
2. Book Value at 1.22. So you overpaid for the asset by about 4 times. 

Wish me luck, guys! To financial independence! 

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