Date: October 22, 2024
Broker: CGS International Securities
Overview of Singapore Airlines (SIA)
Singapore Airlines (SIA) is a leading global airline company based in Singapore. The company operates a wide range of domestic and international flights, offering both passenger and cargo services.
2QFY25 Financial Preview
- Expected Profit After Tax and Minority Interests (PATAMI):
- Estimated to be around S$400 million to S$430 million for the second quarter of FY25.
- The first half of FY25 PATAMI is expected to align with 51% of the broker’s full-year forecast, which is generally in line but falls below the projections of some analysts.
Key Drivers and Challenges
-
Passenger Yields:
- Passenger yields are likely to have continued their downward trend due to increased competition in the market.
- Although there is heightened competition, this negative effect has been partially mitigated by other factors.
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Cargo Demand and Yields:
- Higher demand for cargo services has provided some support for the company’s earnings.
- Cargo yields have also seen improvement, which has helped offset the decline in passenger revenues.
-
Oil Prices:
- The airline has benefited from lower oil prices, which have reduced operating costs.
Investment Recommendation
- Current Rating: Reduce
- Target Price: S$5.88 (CY24F P/BV of 1.1x, +1 standard deviation from the 2011 mean)
Analyst Notes
The report reiterates a “Reduce” rating for Singapore Airlines, as the broker expects the airline to continue experiencing a gradual downdrift in earnings. The target price of S$5.88 reflects the challenges posed by ongoing competition in the passenger sector, despite some positive offsetting factors such as stronger cargo performance and reduced fuel costs.
