Stock Upgraded: SIA Engg by Citigroup

SIA Engg fair value raised to 3.76 sgd – Citigroup Citigroup has raised its fair value for SIA Engineering Co Ltd to 3.76 sgd from 2.75 because it expects the aircraft maintenance, repair and overhaul (MRO) unit of Singapore Airlines Ltd (SIA) to pay a special dividend whether SIA sells it or not. Citigroup estimates SIA Engineering's dividend potential is supported by cash balance of about 0.43 sgd per share and zero debt as of end-2005. SIA Engineering is one of two SIA subsidiaries that Mentor Minister Lee Kuan Yew recommended that the airline divest to enable it to focus on its core operations. "We expect SIA to retain a meaningful stake in SIA Engineering, which works well for SIA Engineering in our view as being airline-linked has more advantages," Citigroup said in a research note. "SIA Engineering continues to be in a sweet spot of rising MRO demand and a nearly full order book," it said. SIA Engineering's earnings will be driven by SIA's fleet of B777s, most of which are due for their first major overhaul, as well as robust contributions from its joint venture MRO operations, it added. At 9.34 am, SIA Engineering was up 0.02 sgd or 0.63 pct at 3.18 with 249, 000 shares traded.