With Singapore having terminal 4 and changi jewel as it’s 5th terminal, do you think SIA engineering would be a good buy since this company does line management and service airplanes? No doubt there have been issues – Cos of new planes so lesser overhaul and checks and price has taken a beating, but surely SIA engineering will benefit from the new terminals. Would this be considered a moat?
The issue with the company right now is that they are facing some structural change in their industry. I will not think terminal 4 or 5 as a moat for SIA engineering.
In the past, the engine manufacturer like Rolls Royce just manufacture the engine and 3rd party player like SIA Eng will do the maintenance. The current situation is that Rolls Royce sell the engine together with maintenance contract and they subcontract it out to SIA Eng. So now instead of SIA Eng dealing with the customer, they have to go through Rolls Royce and give them a cut.
ST Eng is another MRO player. It has been their mainstay for quite a while. Electronics division is their growth driver now. But given their size, overall growth is muted. More as a dividend play.
Great observation Chor Loo. Keep up the good work :)
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Could you share what’re the structural changes that is disrupting this industry?