SIA Engineering's Shares Fall After Third-Quarter Operating Loss Widens

SIA Engineering Co.'s shares fell Monday morning after the company posted a wider operating loss for the third quarter as costs climbed.

Shares fell as much as 4.9% to 2.31 Singapore dollars in early trade and were recently 3.7% lower.

The Singaporean aerospace company reported an operating loss of S$12.5 million (US$9.4 million) for the quarter on Friday after market close, compared with a loss of S$7.8 million a year earlier.

Though revenue rose 48.6% to S$208.1 million, its group expenditure increased at a higher rate of 49.3% to S$220.6 million.

"Manpower costs increased largely due to increase in headcount, cessation of manpower cost mitigation measures and increments," the company said in a statement Friday.

CGS-CIMB analysts reckon that staff costs will likely remain a concern for SIA Engineering, despite the company benefiting from China's reopening.

"We now think the structural labor shortage affecting the aviation [maintenance, repair and overhaul] industry could take longer than expected to ease," CGS-CIMB analysts Kenneth Tan and Lim Siew Khee said in a research note.

The analysts raised their 2023 and 2024 forecasts for SIA Engineering's staff costs by 2% and 6%, respectively, to factor in the prolonged drag on its earnings.

CGS-CIMB cuts the stock's target price to S$2.42 from S$2.44 and maintains a hold rating.