SIA Engineering, a leading provider of aircraft and engine maintenance services in Asia, has staged a surprising 30% rally, sharply outperforming the S&P 500’s 2.4% gain.

For the latest week, SIA Engineering's stock surged another 5%, riding on the wave of optimism following Singapore's announcement of a major expansion plan for Changi Airport. The aviation maintenance company's shares climbed as investors anticipated potential long-term benefits from the ambitious project.

The Changi Airport Group has broken ground on Terminal 5, a mega-expansion that will nearly double the airport's capacity from 90 million to 140 million passengers annually by the mid-2030s. This project, expected to cost tens of billions of dollars, underscores Singapore's commitment to cementing its position as a leading global aviation hub. The expansion aligns with projections from the International Air Transport Association, which predicts that the Asia Pacific region will capture half of all global passenger demand by 2040.

For SIA Engineering, this expansion signals potential growth opportunities in aircraft maintenance and related services. As Changi Airport's capacity increases, so too may the demand for aviation support services. While the news also mentioned ST Engineering's new maintenance facility for widebody jets, the overall growth in the sector appears to be driving positive sentiment for aviation-related stocks like SIA Engineering. Investors seem to be betting on the company's ability to capitalize on Singapore's bold investment in the future of air travel, despite potential headwinds such as economic uncertainty and evolving travel patterns.

SIA Engineering Company was spun off from Singapore Airlines in 2000. The company provides line maintenance services at 36 airports and has six hangars in Singapore, three in The Philippines and 2 hangars in Malaysia are in development for base maintenance activities.

The company also provides component support, cabin refurbishment, and engine services for the most popular engines such as the CFM56, LEAP Series, GE90, GEnx, and the Trent series of engines. SIA Engineering also has a joint venture with RTX for the overhaul of PW1000G GTF engines.

For SIA Engineering, the main risk would be a reduction in flight activity that would reduce demand for aircraft and engine maintenance. Another risk is part shortages, which increase turnaround times in the maintenance shops.

Currently, we will not see reduced demand for maintenance any time soon, but growth rates may flatten as the comparable periods are stronger. Original equipment manufacturers are also known as OEMs, are terribly late on new aircraft deliveries. That means that airlines have to keep older aircraft in service, and this requires additional maintenance activities. At times, airlines even take aircraft out of storage, which increases demand for shop visits. SIA Engineering has expanded its engine shop capacity for quick turns from 12 to 20 engines. Additionally, the opening of the hangars in Malaysia slated for H2 2025 provide additional maintenance capacity.

So, there are opportunities, but the supply chain disruptions are also affecting MRO shops.

In FY25, sales rose 13.8% to S$1.245 billion while costs rose 12.7% to S$1.23 billion, leaving the company with an S$14.6 million profit. While this marked a significant year-on-year increase, margins of 1.2% are hardly impressive. The bigger contribution came from profit sharing. Profits from associated and joint ventures increased 17.4% to S$118.6 million, bringing the group profit to almost S$140 million, marking a 43.8% increase.