Comprehensive Analysis of Airline Stocks
Broker: CGS International Securities
Date: November 9, 2024
Singapore Airlines: 2QFY25 Weaker Than Expected
Singapore Airlines (SIA) reported a core net profit of S\$296 million for 2QFY25, significantly below expectations. This profit was 29% lower than the S\$416 million preview, 54% lower year-on-year (yoy), and 32% lower quarter-on-quarter (qoq). The stock is likely to face a sell-off when the market reopens due to this disappointing performance. Despite the weak results, the target price (TP) has been increased to S\$6, reflecting a forward roll to end-CY25F with an unchanged P/BV of 1.1x.
Quarterly Insights
SIA’s performance was impacted by weaker passenger yields and higher non-fuel unit costs compared to the previous quarter. The mainline carrier SQ’s yields dropped to 11.10 Scts/RPK, a 9% yoy decline. Slightly better-than-expected yields from Scoot and a marginal increase in cargo yields did little to offset the overall decline. Non-fuel unit costs rose by 3.5% qoq due to increased handling charges, inflight meals, and passenger costs, despite lower fuel costs.
Performance Metrics
The Passenger Load Factor (PLF) has been declining, with competition intensifying. SIA’s passenger revenue per Available Seat Kilometer (RASK) moderated for the eighth consecutive quarter, with the spread between unit revenue and unit cost narrowing to the lowest since the post-COVID recovery began. Despite robust demand expected during the year-end travel peak, weaker yields could impact profitability, even though lower oil prices might buffer this impact. The FY25F core EPS forecast has been reduced by 5% due to lower yield assumptions for the mainline carrier SQ, partially offset by higher cargo yield assumptions and lower jet fuel price assumptions.
Financial Summary
- Revenue (S\$m): 19,354 (FY25F), 19,340 (FY26F), 19,747 (FY27F)
- Operating EBITDA (S\$m): 4,066 (FY25F), 3,646 (FY26F), 3,578 (FY27F)
- Net Profit (S\$m): 2,653 (FY25F), 1,194 (FY26F), 992 (FY27F)
- Core EPS (S\$): 0.51 (FY25F), 0.40 (FY26F), 0.33 (FY27F)
- Dividend Yield: 4.34% (FY25F), 3.41% (FY26F), 2.79% (FY27F)
- P/BV (x): 1.21 (FY25F), 1.19 (FY26F), 1.16 (FY27F)
- ROE: 9.4% (FY25F), 7.5% (FY26F), 6.1% (FY27F)
Analysis of Other Airline Stocks
Capital A (CAPITALA MK)
Capital A is not rated, with a current price of RM0.97 and a market cap of \$956 million. The stock has a P/E ratio of 10.3 for CY24F and 8.5 for CY25F, with a projected EPS CAGR of 64.2%. The recurring ROE is expected to be -7.7% for CY24F and -19.4% for CY25F, with an EV/EBITDA of 6.1 for CY24F and 14.0 for CY25F.
InterGlobe Aviation (INDIGO IN)
InterGlobe Aviation is not rated, with a current price of Rs4,002.95 and a market cap of \$18,330 million. The stock has a P/E ratio of 19.5 for CY24F and 22.9 for CY25F. The EPS CAGR is not provided, but the recurring ROE is projected to be 112.16% for CY24F and 18.98% for CY25F. The EV/EBITDA is 10.6 for CY24F and 10.5 for CY25F, with a dividend yield of 0.0% for CY24F and 1.1% for CY25F.
Asia Aviation PCL (AAV TB)
Asia Aviation PCL is not rated, with a current price of THB2.88 and a market cap of \$1,085 million. The stock has a P/E ratio of 12.0 for CY24F and 12.1 for CY25F, with an EPS CAGR of 61.9%. The recurring ROE is expected to be 3.52% for CY24F and 2.81% for CY25F, with an EV/EBITDA of 6.5 for CY24F and 5.9 for CY25F.
Air Arabia (AIRARABI UH)
Air Arabia is not rated, with a current price of AED2.90 and a market cap of \$3,685 million. The stock has a P/E ratio of 10.0 for CY24F and 9.7 for CY25F, with an EPS CAGR of -3.0%. The recurring ROE is projected to be 1.69% for CY24F and 1.56% for CY25F. The EV/EBITDA is 5.2 for CY24F and 5.0 for CY25F, with a dividend yield of 6.5% for CY24F and 6.7% for CY25F.
Ryanair (RYA ID)
Ryanair is not rated, with a current price of €18.92 and a market cap of \$22,133 million. The stock has a P/E ratio of 10.9 for CY24F and 13.7 for CY25F, with an EPS CAGR of -3.4%. The recurring ROE is expected to be 2.88% for CY24F and 2.78% for CY25F, with an EV/EBITDA of 6.1 for CY24F and 7.1 for CY25F, and a dividend yield of 1.7% for CY24F and 2.0% for CY25F.
easyJet (EZJ LN)
easyJet is not rated, with a current price of £5.46 and a market cap of \$5,356 million. The stock has a P/E ratio of 9.1 for CY24F and 7.8 for CY25F, with an EPS CAGR of 20.9%. The recurring ROE is projected to be 1.29% for CY24F and 1.14% for CY25F. The EV/EBITDA is 2.9 for CY24F and 2.5 for CY25F, with a dividend yield of 2.2% for CY24F and 2.7% for CY25F.
Southwest (LUV US)
Southwest is not rated, with a current price of \$31.26 and a market cap of \$18,748 million. The stock has a P/E ratio of 41.5 for CY24F and 20.0 for CY25F, with an EPS CAGR of 34.9%. The recurring ROE is expected to be 1.88% for CY24F and 1.71% for CY25F. The EV/EBITDA is 9.1 for CY24F and 6.5 for CY25F, with a dividend yield of 2.3% for CY24F and 2.4% for CY25F.
JetBlue (JBLU US)
JetBlue is not rated, with a current price of \$6.05 and a market cap of \$2,099 million. The stock does not have a P/E ratio for CY24F and CY25F. The EPS CAGR is not provided, but the recurring ROE is projected to be 0.70% for CY24F and 0.75% for CY25F. The EV/EBITDA is 13.9 for CY24F and 8.2 for CY25F, with a dividend yield of 0.0% for both years.
Pegasus (PGSUS TI)
Pegasus is not rated, with a current price of TRY239.50 and a market cap of \$3,484 million. The stock has a P/E ratio of 13.6 for CY24F and 12.7 for CY25F, with an EPS CAGR of -18.1%. The recurring ROE is expected to be 1.61% for CY24F and 1.64% for CY25F. The EV/EBITDA is 6.9 for CY24F and 5.6 for CY25F, with a dividend yield of 0.0% for both years.
Full-Service Carriers
Cathay Pacific (293 HK)
Cathay Pacific is not rated, with a current price of HK\$8.14 and a market cap of \$6,740 million. The stock has a P/E ratio of 7.5 for CY24F and 6.9 for CY25F. The EPS CAGR is not provided, but the recurring ROE is projected to be 0.94% for CY24F and 0.88% for CY25F. The EV/EBITDA is 4.5 for CY24F and 4.3 for CY25F, with a dividend yield of 5.9% for CY24F and 6.6% for CY25F.
Bangkok Airways (BA TB)
Bangkok Airways is not rated, with a current price of THB25.50 and a market cap of \$1,570 million. The stock has a P/E ratio of 15.2 for CY24F and 15.0 for CY25F, with an EPS CAGR of 1.8%. The recurring ROE is expected to be 2.67% for CY24F and 2.40% for CY25F. The EV/EBITDA is 12.3 for CY24F and 13.1 for CY25F, with a dividend yield of 3.1% for both years.
China Eastern (670 HK)
China Eastern is not rated, with a current price of HK\$2.39 and a market cap of \$11,178 million. The stock has a P/E ratio of 16.2 for CY25F. The EPS CAGR is not provided, but the recurring ROE is projected to be 1.22% for CY24F and 1.13% for CY25F. The EV/EBITDA is 9.1 for CY24F and 7.1 for CY25F, with a dividend yield of 0.0% for both years.
China Southern (1055 HK)
China Southern is not rated, with a current price of HK\$3.56 and a market cap of \$13,957 million. The stock has a P/E ratio of 114.2 for CY24F and 14.8 for CY25F. The EPS CAGR is not provided, but the recurring ROE is projected to be 1.55% for CY24F and 1.40% for CY25F. The EV/EBITDA is 7.3 for CY24F and 6.4 for CY25F, with a dividend yield of 0.0% for both years.
Air China (753 HK)
Air China is not rated, with a current price of HK\$4.68 and a market cap of \$15,502 million. The stock has a P/E ratio of 200.2 for CY24F and 16.7 for CY25F. The EPS CAGR is not provided, but the recurring ROE is projected to be 1.86% for CY24F and 1.67% for CY25F. The EV/EBITDA is 8.1 for CY24F and 7.7 for CY25F, with a dividend yield of 0.0% for both years.
Qantas Airways (QAN AU)
Qantas Airways is not rated, with a current price of A\$8.44 and a market cap of \$8,721 million. The stock has a P/E ratio of 21.4 for CY24F and 18.4 for CY25F, with an EPS CAGR of 5.2%. The recurring ROE is expected to be 78.63% for CY24F and 23.22% for CY25F. The EV/EBITDA is 8.2 for CY24F and 7.4 for CY25F, with a dividend yield of 0.0% for CY24F and 1.2% for CY25F.
Turkish Airlines (THYAO TI)
Turkish Airlines is not rated, with a current price of TRY289.25 and a market cap of \$11,614 million. The stock has a P/E ratio of 4.1 for both CY24F and CY25F, with an EPS CAGR of -7.7%. The recurring ROE is projected to be 0.66% for CY24F and 0.56% for CY25F. The EV/EBITDA is 2.9 for CY24F and 22.2 for CY25F, with a dividend yield of 0.0% for CY24F and 1.0% for CY25F.
