SIA Engineering

I am not vested in SIA Engineering but it has always been in my radar in view of its solid track record, low or little debt,consistent dividends policy and seemingly high barrier of entry business. However, the recent set of results from SIA Engineering and in fact also the last half a year is rather shocking in my view. Net profit margin has dropped by 30% to 40%.The issues if you read the fine print will point to structural change ongoing in its business. Engines improvements, extention of "on wing" life of certain models and accelerated retirement of older engines all result in a drastic drop in visits to the workshops.It appears all quite certain the trend will accelerate as you can expect more and more newer engines models coming on board that will reduce the need of more frequent maintainence.In other words, the OEMs provider have cut into SIA Engineering space.

With this ongoing structural change, previous record of SIA engineering performance is no longer a good gauge of future performance.I am of the opinion that the company will need to undergo a catharsis of change with no certainty that it can emerge the better of it than before.

Hence, I am going to leave this counter alone although there is a recent significant price drop.