Date: October 22, 2024
Broker Name: CGS International Securities

Company Overview

Singapore Airlines (SIA) is the flag carrier airline of Singapore, known for its comprehensive global network and premium services. The company operates in both passenger and cargo segments.

2QFY25 Financial Preview

Expected Performance:

• Profit After Tax and Minority Interests (PATAMI): SIA is projected to report a PATAMI of approximately S$400 million to S$430 million for the second quarter of FY25.
• 1H Performance: The first half’s performance is expected to be in line with 51% of the full-year forecast, although slightly below the expectations of certain analysts.

Key Factors Impacting Earnings

1. Passenger Yields:
   • Passenger yields are anticipated to continue a gradual decline due to increased competition in the airline sector. This trend reflects the ongoing pressure on ticket prices as airlines strive to capture market share.
2. Cargo Segment:
   • The decline in passenger yields is expected to be partially offset by higher demand and improved yields in the cargo segment, demonstrating resilience amid competitive challenges.
3. Oil Prices:
   • Lower oil prices are also contributing positively, easing some of the cost pressures that airlines typically face.

Analyst Recommendation

Current Rating: Reduce

• Target Price: S$5.88
• Valuation Basis: The target price is based on a projected price-to-book value (P/BV) of 1.1x for the calendar year 2024 (CY24F), which is +1 standard deviation from the 2011 mean.
• Rationale: Despite some support from the cargo segment and lower oil prices, the overall outlook remains cautious. The continuing downdrift in earnings suggests potential challenges ahead, leading to a “Reduce” rating from the analysts.