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

1. 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.

2. 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.

3. 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.