Date: October 22, 2024
Broker: CGS International Securities

Earnings Preview for 2QFY25

Singapore Airlines (SIN) is expected to report a profit after tax and minority interests (PATAMI) in the range of approximately S$400 million to S$430 million for the second quarter of the fiscal year 2025. This would bring the first-half PATAMI broadly in line with 51% of the broker’s full-year forecast, though it remains below estimates from certain analysts.

Factors Affecting Performance

• Passenger Yields: The company is facing pressure on passenger yields due to increasing competition. This trend is likely to continue, contributing to a gradual downdrift in earnings.
• Cargo Demand: Despite the challenges in passenger yields, Singapore Airlines is experiencing a partial offset due to higher demand and yields in its cargo operations.
• Oil Prices: Lower oil prices are also helping mitigate some of the adverse effects from declining passenger yields.

Investment Recommendation

• Rating: Reduce
• Target Price: S$5.88
• Valuation Metric: CY24F Price-to-Book Value (P/BV) of 1.1x, which is 1 standard deviation above the 2011 mean.

Analyst Commentary

The report reiterates a “Reduce” rating for Singapore Airlines, citing ongoing challenges in maintaining robust earnings due to competitive pressures on passenger services. While cargo operations and lower oil prices provide some relief, they are not sufficient to fully counter the decline in passenger yields. The recommendation remains cautious, with expectations of continued earnings downdrift in the near term.