WiseVest - Aerospace Sector

ST Aerospace, the aerospace engineering division of SGX-listed ST Engineering announced its expansion of hangar in Singapore. The new hangar, to cost S$25m to build will be located near ST Aviation Services Co. (SASCO) Changi facility and will enable ST Aero to expand its maintenance, repair & overhaul (MRO), allowing it to capture more customers on the back of increasing air transport in the region.

Speaking of air travel, budget carriers in the region will hurt profits of national carriers like Thai Airways, SIA, MAS and Garuda Indonesia. Furthermore with Australia closing the door on SIA for the lucrative Sydney-LA route, airlines stock are frankly still not a good buy now. Rather, to bank in on the popularity of air transport, look to companies providing indirect services in this sectior. For example, SIA Engineering company and SATS which provides MRO and catering services. Rumors abound a few months back on the possibility of SIA Engineering being acquired by ST Aero which could be a good fit and adds to synergies in making ST Aero a worldwide player in the MRO sector.

For small caps, look at Inter-Roller Engineering, whose business is indirectly within the air transport services sector. Inter-Roller specializes in installing baggage handling systems in airports in the region. On the back of massive investment by India and China in building new airports and upgrading systems of their airports, Inter-Roller has seen their order book to a record S$220m. It was recently awarded a new contract worth S$42m to install a baggage handling system in one of China's largest airports to cater to 40m passengers. This project is expected to complete in 2007.