SIA Engineering drops on earnings worries

Singapore Airlines Engineering (SIAEC) aircraft hanger capable of handling the A380. Shares in SIA Engineering fell as much as 4.3 per cent to the lowest in one month after a 19.5 per cent drop in the company's first-quarter operating profit sparked
Singapore Airlines Engineering (SIAEC) aircraft hanger capable of handling the A380. Shares in SIA Engineering fell as much as 4.3 per cent to the lowest in one month after a 19.5 per cent drop in the company's first-quarter operating profit sparked worries of earnings downgrades. -- FILE PHOTO: SIA ENGINEERING (SIAEC)

REUTERS - Shares in SIA Engineering fell as much as 4.3 per cent to the lowest in one month after a 19.5 per cent drop in the company's first-quarter operating profit sparked worries of earnings downgrades.

The company, a subsidiary of Singapore Airlines, also reported a 3.7 per cent decline in April to June revenue.

Brokerage UOBKayHian said given that the market expected a 5.4 per cent rise in SIA Engineering's 2014 net profit, it now expects the market to cut earnings forecasts. It downgraded its rating to "sell" from "hold."

Shares in SIA Engineering fell 3.5 per cent to $4.98, with 366,000 shares traded versus average full-day volume of 228,000 shares traded over the past five days. The stock was the biggest loser on Tuesday in a market up 0.3 per cent, after rising about 17 per cent this year as of Monday's close.

UOBKayHian, which attributed the stock's gains this year to the market's appetite for cash-rich yield stocks, said: "We believe the outperformance will not continue given the weak revenue and declining operating margins."