SIA Engineering (S59.SG) surrenders its earlier rise to $4.31 and is now flat at $4.27, as the renewal of a fleet maintenance contract worth $300 million with SilkAir, the regional arm of SIA (C6L.SG), fails to inspire. 

The new contract is valid for 5 years and replaces the existing contract, which expires this year. “SIA Engineering is the maintenance arm of the SIA group, thus this contract does not come as a surprise,” says UOB KayHian, which has a Sell call with a $3.99 target. 

 

Adds costs remain a key concern for aviation service providers like SIA Engineering in the wake of recent troubles faced by Roll Royce’s T900 engines; “with more stringent checks now in place, costs could escalate further.” Orderbook quotes suggest the shares are likely to hold above $4.20 but below $4.34.