SINGAPORE (Oct 31): UOB Kay Hian has upgraded SIA Engineering to "hold" from "sell" and raised its price target to $4.90 from $4.50, saying the company's planned foray into India's aircraft maintenance, repair and overhaul (MRO) market is positive.

SIA Engineering and Boeing are said to have submitted a notice to the Competition Commission of India outlining plans to establish a joint-venture company to provide MRO services for Boeing aircraft.

The joint venture is likely to be approved, according to UOB Kay Hian analyst K Ajith, who noted that Boeing has a strong relationship with the Indian government and has existing partnerships with leading Indian IT names Tata Consultancy Systems, Wipro and Infosys.

"Thus, the odds of the Boeing/SIAEC JV being approved are high," he said in a note today.

"If approved, the JV could also provide MRO services to Vistara, the airline JV between Tata and Singapore Airlines."

That said, SIA Engineering's joint venture with Boeing will only make commercial sense if it can partner Air India, the largest operator of Boeing planes in India, he added.

India's MRO market is valued at about US$700 million ($875 million) and is expected to grow at a 7% compounded annual growth rate until 2020, he noted.

Air India, Jet Airways and Spice Jet operate Boeing aircraft in India, with a total of 331 planes in their respective fleets, more than double the number of planes owned by Singapore Airlines, SIA Engineering's biggest customer, according to Ajith.

SIA Engineering shares traded at $4.69, down 0.6%, at 10:03am (0203 GMT).