SINGAPORE (July 28): CIMB is keeping its “add” recommendation for SIA Engineering Co (SIAEC), with an unchanged target price of $4.16.

According to analyst Lim Siew Kee, SIAEC’s core earnings were in line with CIMB’s forecast although  revenue fell 2% to $272 million.

Lim noted that the group’s pre-tax earnings margins of 11.7% were lower than the FY2016’s average of 13.3%, on the back of fewer heavy checks performed during the quarter. But she is maintaining her pretax margins forecast at 14.5% in anticipation of better quarters.

“New generation engines may require lesser scope of work but we believe the low fuel prices are still keeping some of the older aircraft in use, which could provide a second wind for SIAEC’s associates and JVs,” writes Lim in a note on Wednesday.

The group’s associates and joint venture companies, which contributed 50% to SIAEC’s pretax profits, could also provide earnings growth for the group in FY2017.

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Associates, such as Eagles Services Asia reported earnings of $13.3 million, while its joint ventures like Singapore Aero Engine Services (SAESL), saw higher earnings of $7.4 million.

As at 2.51pm, shares in SIAEC are trading 1.6% higher at $3.74.