SINGAPORE (Nov 2): Market watchers got a shock on Tuesday after SIA Engineering Company (SIAEC) announced a dividend payout of 4 cents for 1HFY17, down from the 6 cents a year ago.

In addition, SIAEC’s management stressed it would continue to restructure and streamline its operations amid a challenging outlook.

(See also: SIA Engineering’s half-year earnings nearly triple to $234 mil, lifted by one-off gains)

Maybank Kim Eng’s analysts Derrick Heng and Neel Sinha said in a note on Wednesday the move was “surprising given the stabilising earnings and strong cash balance”.

“Coupled with yet another cautious guidance, we read this DPS cut as a negative signal to its outlook,” said Heng and Sinha, who is maintaining their “hold” rating on the stock with a target price of $3.70.

To recap, SIAEC posted earnings of $233.9 million, propped up by one-off gains of $178 million from the restructuring of its Rolls Royce joint ventures and a $21.3 million increase in staff cost.

Revenue declined 1.3% from lower fleet maintenance revenue, which was only partially mitigated by the higher line maintenance revenue from higher flight activities at Changi Airport.

Heng and Neel Sinha noted that core earnings, excluding the exceptional items, was about $77.2 million and achieved 43% of Maybank Kim Eng’s full year earnings forecast.

On the other hand, the 5.2% decrease in earnings for its engine repair and overhaul business signalled that work volumes were still low.

Putting things more bluntly were UOB Kay Hian’s analysts K Ajith and Sophie Leong in another report out the same day.

The duo believes SIAEC’s repair and overhaul segment was “likely to have been in the red in 2QFY17”.

Given the 3.3% increase in Changi Airport’s aircraft movements, Ajith and Leong had expected line maintenance revenue to have risen along with it.

“Assuming that SIAEC’s share of Changi Airport aircraft movements remained relatively stable at 78%, this would suggest losses for the repair and overhaul segment,” said the pair in a note on Wednesday.

To that end, UOB Kay Hian is maintaining its “sell” on the stock with a target price of $3.40.

Shares in SIAEC are trading 1 cent lower at $3.69.