Full year revenue rose 3.5% to $1045m while net profit rose 2.7% to $260.6m, within our expectations of $1063m and $256.5m respectively. Adjusted for estimated cost savings from the Government Budget measures of $10m after tax and a further $1m boost from the corporate tax reduction, FY2009 net profit likely fell by about 2% yoy to slightly below $250m, or just a negligible 3% variance from our forecast. However, DPS of $0.16 was below our expectations of $0.19.

Although SIE reported 4Q09 net profit rose 4% qoq and 19% yoy, this seems counter-intuitive as most of the damage to the aviation industry would have been done during the quarter. Reversing the cost savings from the Jobs Credit scheme and the corporate tax rate, we estimate 4Q09 net profit actually fell 17% qoq and 1.3% yoy.

Fleet management was outstanding, up 113% in 2H09 and 60% for the full year. However, it only accounts for 11% of group revenue. Airframe maintenance and component overhaul (54% of revenue) fell 8% yoy in 2H09, hurt by SIA’s fleet renewal program. Line maintenance (35%) rose 12% yoy in 2H09 but largely on the back of higher year-end travel in 3Q as things had worsened considerably by 4Q. Other than the Budget and tax savings, SIE was saved mainly by its regional associates & JVs which notched up a 10% rise, accounting for 57% of group pretax.

With 4Q09 the more likely tone in the next few quarters, we are projecting an 18% fall in earnings in FY10. Line maintenance revenue is likely to decline this year on capacity cuts and route rationalisation by the airlines. In addition, we expect its associates & JVs to be impacted negatively as well. While we expect operating expenses to similarly fall, a deteriorating bottomline is unavoidable.

With SIE share price up sharply in recent weeks and now trading at 13x FY10 earnings relative to its historical average of 13.5x, we reckon the stock is now fairly valued. Dividend yield is also a pedestrian 5%.