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Singapore Airlines (SIA SP): Strong Finish, HOLD Rating – Maybank Research Report 2025

Posted on May 16, 2025 at 10:49 am (GMT+8)

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Maybank Research Pte Ltd

May 16, 2025

Singapore Airlines: A Strong Finish with Bumper Dividends, But HOLD for Now

Executive Summary: Singapore Airlines FY4Q25 Performance

  • Singapore Airlines (SIA SP) reported a strong FY4Q25, marked by resilient air travel demand despite intense competition and geopolitical headwinds. [[1]]
  • Net profit reached SGD410m (-29% YoY), surpassing expectations due to robust passenger carriage offsetting yield declines. [[1]]
  • A final dividend per share (DPS) of 30 cents was declared, exceeding both our and market forecasts. [[1]]
  • FY26-28E core EPS estimates have been raised, factoring in positive operating leverage from a weaker USD and lower jet fuel prices. [[1]]
  • The target price (TP) is raised to SGD6.85, rolling forward valuation to FY26E, but maintained at a mid-cycle P/B of 1.25x. [[1]]
  • Maintain a HOLD rating due to fair valuation, with near-term share price support expected from cum-dividend status (ex-date on 8 Aug). [[1]]

Financial Performance Analysis

  • In 2H, revenue reached SGD10b (+1.9% YoY), driven by passenger and cargo carriage growth of 5.0% and 7.3%, respectively. [[1]]
  • Passenger and cargo yields declined by 4.5% and 2.1%, respectively, with moderation slowing sequentially. [[1]]
  • Potential cost savings may need to be passed on to customers amid rising competition. [[1]]
  • Cargo carriage increased in East and West Asia due to front-loading, while demand weakened in the Americas and Europe. [[1]]
  • Cargo load factor decreased by 1.4 percentage points to 54.9%. [[1]]

Strategic Initiatives and Outlook

  • All Nippon Airways (ANA) and SIA will start revenue-sharing flights between Japan and Singapore from Sep 2025. Joint fare products will be available from May 2025. [[1]]
  • SIA holds a 25.1% stake in the enlarged Air India following the completion of the Air India-Vistara merger on 12 Nov 2024. [[1]]
  • Air India aims to capture a larger market share of long-haul transit traffic by connecting North America and Europe to Asian destinations via India. [[1]]

Navigating a Challenging Operating Environment

  • The global aviation industry faces challenges including changing tariff policies, trade tensions, macroeconomic uncertainty, and supply chain constraints. [[1]]
  • These factors could negatively impact consumer and business confidence, affecting passenger and cargo demand. [[1]]
  • SIA will focus on product leadership and service excellence, investing in next-generation aircraft, new cabin products, and airline lounges to maintain its competitive edge. [[1]]

Stock Information and Major Shareholders

  • Current Price: SGD 6.88 [[1]]
  • 12-Month Price Target: SGD 6.85 (-0%) [[1]]
  • Previous Price Target: SGD 6.45 [[1]]
  • Rating: HOLD [[1]]
  • 52-Week High/Low (SGD): 7.11/5.88 [[1]]
  • 3-Month Average Turnover (USDm): 46.1 [[1]]
  • Free Float (%): 33.4 [[1]]
  • Issued Shares (m): 2,978 [[1]]
  • Market Capitalisation: SGD20.5B (USD15.8B) [[1]]
  • Major Shareholders:
    • Temasek Holdings Pte Ltd. (53.4%) [[1]]
    • The Vanguard Group, Inc. (1.7%) [[1]]
    • BlackRock Fund Advisors (0.9%) [[1]]

Price Performance Analysis

  • Absolute Performance:
    • -1 Month: 9% [[1]]
    • -3 Month: 8% [[1]]
    • -12 Month: 1% [[1]]
  • Relative to Index:
    • -1 Month: 2% [[1]]
    • -3 Month: 8% [[1]]
    • -12 Month: (14)% [[1]]

Financial Summary and Forecasts

(FYE Mar, SGD m) [[1]]

Metric FY24A FY25A FY26E FY27E FY28E
Revenue 19,013 19,540 19,493 19,369 19,242
EBITDAR 4,909 4,092 4,110 3,907 3,699
Core net profit 2,610 1,694 1,555 1,394 1,234
Core EPS (cts) 87.7 56.9 52.2 46.8 41.4
Core EPS growth (%) 20.6 (35.1) (8.2) (10.3) (11.5)
Net DPS (cts) 48.0 40.0 30.0 25.0 20.0
Core P/E (x) 7.3 11.9 13.2 14.7 16.6
P/BV (x) 1.2 1.3 1.3 1.2 1.2
Net dividend yield (%) 7.5 5.9 4.4 3.6 2.9
ROAE (%) 14.5 16.9 9.5 8.2 7.0
ROAA (%) 5.6 3.9 3.6 3.2 2.8
EV/EBITDAR (x) 4.3 6.0 6.1 6.4 6.8
Net gearing (%) (incl perps) 9.5 25.6 25.9 24.3 22.9
Consensus net profit – – 1,335 1,225 na
MIBG vs. Consensus (%) – – 16.5 13.8 na

Earnings Revisions

(SGD m) [[2]]

Item FY25E FY26E FY27E
New Old Chg (%) New Old Chg (%) New Old Chg (%)
Revenue (SGD m) 19,492.5 19,353.3 0.7% 19,369.5 19,025.9 1.8% 19,242.4 19,242.4 0.0%
EBIT (SGD m) 1,761.1 1,385.0 27.2% 1,539.4 1,033.9 48.9% 1,317.7 1,317.7 0.0%
EBITDA (SGD m) 4,110.5 3,831.0 7.3% 3,906.9 3,552.6 10.0% 3,699.5 3,699.5 0.0%
Core net profit (SGD m) 1,554.8 1,226.0 26.8% 1,394.4 1,004.0 38.9% 1,234.0 1,234.0 0.0%
EPS (cts) 52.2 41.2 26.8% 46.8 33.7 38.9% 41.4 41.4 0.0%
EBITDA margin 21.1% 19.8% 1.3 20.2% 18.7% 1.5 19.2% 19.2% 0.0
Net margin 8.0% 6.3% 1.6 7.2% 5.3% 1.9 6.4% 6.4% 0.0

Peer Comparison

Company BBG Code MBIG Rec MBIG TP (LC) Price (LC) FYE mm/dd Mkt Cap USDm P/E (x) Actual EV/EBITDA (x) Actual P/B (x) Actual ROE (%) Actual
Singapore Airlines Ltd. SIA SP Hold 6.85 6.88 03/31 20,427 7.6 10.2 1.5 14.8%
Air New Zealand Limited AIR NZ NR NA 0.62 06/30 1,576 14.3 17.5 1.0 7.1%
PAL Holdings, Inc. PAL PM NR NA 4.52 12/31 2,821 14.4 – 3.4 28.3%
China Southern Airlines Company Limited 1055 HK NR NA 3.51 12/31 17,107 – 19.0 1.7 -4.9%
China Eastern Airlines Corporation Limited 670 HK NR NA 2.58 12/31 13,967 – 24.2 1.3 -9.9%
Air China Limited 601111 CH NR NA 7.56 12/31 21,686 – – 3.1 -0.6%
ANA Holdings Inc. 9202 JP NR NA 2,868.50 03/31 12,328 8.8 10.4 1.2 14.1%
Cathay Pacific Airways 293 HK NR NA 9.84 12/31 10,539 7.4 7.3 1.2 17.7%
Eva Airways Corporation 2618 TT NR NA 42.75 12/31 9,900 8.0 8.7 1.9 25.2%
Asiana Airlines Inc. 020560 KS NR NA 9,770.00 12/31 1,840 – – 2.2 -62.7%
Qantas Airways Limited QAN AU NR NA 9.99 06/30 12,677 11.4 9.2 7.1 NM
China Airlines Ltd. 2610 TT NR NA 22.30 12/31 5,787 9.4 11.0 1.6 17.9%
Korean Air Lines Co., Ltd. 003490 KS NR NA 22,800.0 12/31 7,702 6.4 6.1 0.8 13.2%

AVERAGE [[2]]

10.0 12.6 10.9 7.6 6.0 3.9 4.1

Value Proposition

  • SIA is a world-leading air transportation provider known for product leadership, service excellence, and strong network connectivity. [[3]]
  • The group aims to expand revenue beyond flying by investing in digital capabilities and establishing commercial partnerships with other airlines. [[3]]
  • SIA retains its first-mover advantage, achieving record financial performance and demonstrating resilience in meeting the surge in international air travel demand. [[3]]
  • With a modern, fuel-efficient fleet and enhanced connectivity, SIA is well-positioned for future growth despite industry competition. [[3]]

Historical Share Price Trend

  • Key Events Influencing Share Price:
    • Sep 2020: SIA cut approximately 4,300 positions due to the Covid-19 pandemic. [[3]]
    • Mar 2022: DHL and SIA agreed to deploy five Boeing 777 freighters to meet growing demand in international express shipping markets. [[3]]
    • Nov 2022: SIA and Tata Sons agreed to merge Air India and Vistara, giving SIA a 25.1% stake in the enlarged entity. [[3]]
    • May 2023: SIA announced it would redeem 50% of its mandatory convertible bonds (MCBs) issued in Jun 2021. [[3]]
    • May 2024: SIA signed an agreement with Neste to purchase 1,000 tonnes of neat Neste MY Sustainable Aviation Fuel. [[3]]

Financial Metrics

  • SIA posted record Group revenue and net profit for FY24, driven by robust passenger performance, partially offset by lower cargo contribution. [[3]]
  • SIA and Scoot achieved record load factors, nearing pre-pandemic capacity levels. [[3]]
  • Healthy balance sheet with the full redemption of the remaining 25% of MCBs (issued in Jun’21) in June 2024. [[3]]
  • Strong operating cash flow supports fleet expansion plans and dividend payouts. [[3]]

Swing Factors

  • Upside Factors:
    • Higher-than-expected passenger load factor due to continued robust air travel demand. [[3]]
    • Better-than-expected yields for passenger and cargo businesses due to capacity constraints. [[3]]
    • Successful completion of the Air India and Vistara merger, boosting SIA’s presence in India’s aviation market. [[3]]
  • Downside Factors:
    • Increased competition from other airlines, especially within the Asia-Pacific region. [[3]]
    • Weaker-than-expected passenger/cargo demand amid geopolitical tensions and macro uncertainties. [[3]]
    • Rising opex and/or jet fuel prices, exerting pressure on operating margins. [[3]]

ESG Analysis

  • Risk Rating & Score: 28.3 (Medium) [[4]]
  • Score Momentum: -0.0/+0.0 [[4]]
  • Last Updated: 23 May 2024 [[4]]
  • Controversy Score: 2.0 (Moderate) [[4]]

Business Model & Industry Issues

  • Aviation industry profitability is highly seasonal and cyclical, driven by passenger and cargo air transportation. [[4]]
  • As air travel rebounds, total fuel consumption and emissions are rising. [[4]]
  • SIA is increasing decarbonisation efforts by operating new-generation aircraft and adopting Sustainable Aviation Fuels (SAF). [[4]]
  • SIA’s global transport network exposes it to corporate governance and business-ethics risks, addressed through impartiality and checks and balances. [[4]]
  • The group focuses on decarbonisation, waste management, and making a positive impact on society as part of its sustainability goals. [[4]]

Material E Issues

  • Emissions, water, and electricity consumption are increasing due to the resumption of aviation activities. [[4]]
  • Considerations for future resource management include increased reliance on solar energy and water recycling. [[4]]
  • Hybrid vehicles with lower petrol use and higher fuel efficiency are being adopted for engineering-related services. [[4]]
  • The Group continues to strive for Building and construction Authority (BCA) accreditation for SIA-owned buildings in Singapore. [[4]]

Key G Metrics and Issues

  • The board has 11 members, including the CEO and non-executive & independent directors. 18% are female directors. [[4]]
  • The remuneration committee is chaired by independent directors, with one exception. [[4]]
  • Key management/directors’ compensation accounted for 0.4%/0.2% of the Group’s net profits. [[4]]
  • The group’s auditor – KPMG LLP – has not been changed since 2015. [[4]]
  • Regulatory risks include overseas expansion, potentially exposing the group to bribery, corruption, and compliance risks. [[4]]
  • SIA has a whistle-blowing programme where reports are investigated independently by Internal Audit, with the Audit Committee reviewing results quarterly. [[4]]
  • To minimise vested interests in sensitive roles, employee roles up to Vice President level are assessed for sensitivity risks biennially. [[4]]
  • No corruption cases were reported for the past year. [[4]]

Material S Issues

  • In 2023, the Group reported 163 recordable work-related injuries, with the overall work-related injuries rate increasing to 8.1. [[4]]
  • Additional precautionary measures include promotion of safe work practices and initiatives to raise awareness of workplace injuries prevention. [[4]]
  • Females account for 49.6% of the group’s staff, while 17.8% of employees are over the age of 50. [[4]]
  • The launching of Singapore Airlines Foundation, dedicating SGD30m to support individuals and communities in need. [[4]]
  • Leverages on AI in the form of HR chatbots to assist employees with HR-related matters. [[4]]

ESG Quantitative Parameters

Particulars Unit FY22 FY23 FY24 293 HK (2023)
E
Scope 1 GHG emissions M tCO2e 7.8 12.7 15.0 11.6
Scope 2 GHG emissions M tCO2e 0.0 0.1 0.1 0.1
Total M tCO2e 7.8 12.8 15.1 11.7
Scope 3 GHG emissions M tCO2e N/A 3.0 3.8 5.9
Total M tCO2e 8.8 15.8 18.9 17.6
GHG intensity (Scope 1 + Scope 2) tCO2e/m2 0.98 0.8 0.78 N/A
Fuel consumption M AG 827 1,353 1,595 1,690
Fuel productivity LTK/AG 9.6 11.8 12.06 N/A
Renewable energy consumption TJ 17.0 15.9 19.4 12.3
Electricity Consumption GWh 21.1 24.7 26.3 N/A
Electricity intensity kWh/m2 N/A 124 137 N/A
% of waste diverted/waste generated % 13.7 13.1% 16.6% 10.9%
Cases of environmental non-compliance % 0 0 0 0
S
% of women in workforce % 48.6% 49.6% 49.6% 49%
% of women in management roles % 33.2% 32.8% 32.8% 27%
Lost time injury frequency (LTIF) rate number N/A N/A N/A N/A
Monetary contribution for CSR (SGD) million N/A N/A 2.6 N/A
G
MD/CEO salary as % of reported net profit % NM 0.31% 0.3% 0.11%
Board salary as % of reported net profit % NM 0.09% 0.09% 0.51%
Independent directors on the Board % 73% 73% 73% 24%
Female directors on the Board % 18% 18% 18% 12%

ESG Qualitative Parameters

  • ESG Policy and Committee: Yes, the Sustainability Steering Committee is chaired by the Chief Sustainability Officer. [[5]]
  • Senior Management Salary Linked to ESG Targets: Yes, ESG metrics are included in the Individual Performance Scorecards. [[5]]
  • Task Force on Climate-related Disclosures Framework: Yes [[5]]
  • Mechanism to Capture Scope 3 Emissions: Yes, parameters include purchased goods and services, upstream transportation, waste, business travel, and employee commuting. [[5]]
  • Key Carbon Mitigation/Water/Waste Management Strategies: SAF testing, solar panel installation, and rainwater harvesting. [[5]]
  • Carbon Offset as Part of Net Zero Target: Yes, the Group participates in the Carbon Offset and Reduction Scheme for International Aviation. [[5]]

ESG Targets

Particulars Target Achieved
Net zero carbon emissions by 2050 On Track
Reduce energy consumption in SIA-owned buildings by 10% form FY2019/20 levels -10% 4.21%
100% renewable energy by 2026 of which at least 50% is self-generated from rooftop solar panels 50% 25%
BCA Green Mark accreditation for SIA-owned buildings in Singapore by FY2026/27 100% On Track
Reduce potable water consumption in SIA-owned buildings by 10% from FY2019/20 -10% On Track
Target at least 30% female representation in the Board 30% 18%
Net zero carbon emissions by 2050 On Track

Overall ESG Score and Assessment

  • Overall Score: 75 [[5]]
  • SIA has an established framework, internal policies, and tangible medium/long-term targets but needs to improve its quantitative “E” metrics YoY. [[5]]
  • SIA’s overall ESG score is 75, indicating an above-average ESG rating. [[5]]
ESG score Weights Scores Final Score
Quantitative 50% 70 35
Qualitative 25% 100 25
Target 25% 60 15
Total 75

Key Financial Ratios and Metrics

Key Metrics FY24A FY25A FY26E FY27E FY28E
P/E (reported) (x) 7.3 7.0 13.2 14.7 16.6
Core P/E (x) 7.3 11.9 13.2 14.7 16.6
P/BV (x) 1.2 1.3 1.3 1.2 1.2
P/NTA (x) 1.2 1.3 1.3 1.2 1.2
Net dividend yield (%) 7.5 5.9 4.4 3.6 2.9
FCF yield (%) 20.1 14.5 5.3 5.8 4.9
EV/EBITDAR (x) 4.3 6.0 6.1 6.4 6.8
EV/EBIT (x) 7.7 14.5 14.3 16.3 19.1

Income Statement (SGD m)

Item FY24A FY25A FY26E FY27E FY28E
Revenue 19,012.7 19,539.8 19,492.5 19,369.5 19,242.4
EBITDAR 4,909.4 4,092.1 4,110.5 3,906.9 3,699.5
Depreciation (2,109.6) (2,308.2) (2,275.3) (2,292.0) (2,304.8)
Amortisation (76.2) (72.8) (74.1) (75.5) (77.0)
EBIT 2,727.5 1,709.1 1,761.1 1,539.4 1,317.7
Net interest income /(exp) 207.2 96.5 100.0 95.0 90.0
Associates & JV 73.7 57.2 (27.5) 10.0 47.5
Exceptionals 0.0 1,097.9 0.0 0.0 0.0
Other pretax income 28.7 4.1 0.0 0.0 0.0
Pretax profit 3,037.1 2,964.8 1,833.6 1,644.4 1,455.2
Income tax (342.0) (152.6) (256.7) (230.2) (203.7)
Minorities (20.3) (34.2) (22.1) (19.8) (17.5)
Discontinued operations 0.0 0.0 0.0 0.0 0.0
Reported net profit 2,674.8 2,778.0 1,554.8 1,394.4 1,234.0
Non-cash & non-recurring items 0.0 0.0 0.0 0.0 0.0
Core net profit 2,610.1 1,693.7 1,554.8 1,394.4 1,234.0

Balance Sheet (SGD m)

Item FY24A FY25A FY26E FY27E FY28E
Cash & Short Term Investments 11,268.8 8,276.3 7,859.8 7,609.4 7,456.1
Accounts receivable 1,770.9 1,502.5 1,588.3 1,628.5 1,658.1
Inventory 268.0 344.9 344.9 344.9 344.9
Reinsurance assets 0.0 0.0 0.0 0.0 0.0
Property, Plant & Equip (net) 0.0 0.0 0.0 0.0 0.0
Intangible assets 304.5 338.6 338.6 338.6 338.6
Investment in Associates & JVs 1,077.6 3,199.6 3,172.1 3,182.1 3,229.6
Other assets 29,574.9 29,424.9 30,149.6 30,857.5 31,552.7
Total assets 44,264.7 43,086.8 43,453.3 43,961.0 44,580.0
ST interest bearing debt 940.0 2,226.6 1,413.2 1,513.2 1,514.2
Accounts payable 4,383.8 4,628.4 4,190.9 4,261.3 4,329.5
Insurance contract liabilities 0.0 0.0 0.0

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