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1HFY22 results broadly in-line

<Results First Take> Singapore Airlines (SIA SP): 1HFY22 Results – Results broadly in-line

  • 2QFY22 net loss of S$428m (vs net loss of S$409m in 1QFY22) met our expectations, 1HFY22 net loss totalled at S$836.8m, tracking well with our FY22F estimate of S$1,231m.
  • Revenue increased by 18.3% q-o-q, led by a sequential improvement in passenger traffic, higher load factors and robust cargo volumes, though offset by yield compression.  
  • Monthly operating cashflows approach near break-even, with the Group recording net operating cash flow (before lease payments) of S$326.9m in 1HFY22.
  • SIA now expects passenger capacity to reach 43% of pre-COVID19 levels by Dec-21 with the launch of more VTLs and plans to expand its network to cover 50% of pre-crisis points by the end of the year.
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Highlights

  • Group traffic (in RPK) surged by 43% (from a low base) to 7% of pre-pandemic levels in 2QFY22, up from 5% in 1QFY22.
  • Overall passenger load factors rose to 17.4% in 2QFY21, from 14.8% in 1QFY22. 
  • Overall group passenger yield fell to 16.4¢ per RPK during the period, down from 17.1¢ per RPK in the previous period.
  • Cargo continues to be a bright spot, with SIA booking record cargo revenue as total cargo volumes up by 8.5% on a sequential basis and cargo yields strengthening by 5.2% during the same period.
  • Despite business recovery, operating losses widened to S$345m in 2QFY22 from S$274m in 1QFY22 due to higher fuel costs and yield compression.
  • Operating cash burn narrowed considerably, with the group recording an operating cash deficit of S$106m (S$18m per month) in 1HFY22 compared to S$1,726 from the previous year.
  • Passenger network now covers 65 destinations, up from 63 in the previous quarter, and is expected to increase to 73 by Dec-21, as SIA continues to launch new routes to tap on demand.
  • Adjusted NAV (assuming conversion of MCBs and convertible bonds) per share was at S$3.33 in 2QFY22, down from S$3.39 in 1QFY22. 
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Our thoughts

  • 1HFY22 net loss of S$837m was largely in line with our full-year projection of a net loss of S$1,231m as we expect net losses to moderate in 2HFY22 on stronger passenger traffic.
  • Passenger and cargo yields will remain elevated compared to pre-crisis levels, but should continue trending down as global capacity is gradually restored.
  • Total unit cost should continue trending lower as passenger load factors trend higher, but buoyant jet fuel costs will pressure operating margins as jet fuel prices are now above pre-crisis levels, as SIA is only 30% and 40% hedged for 2HFY22 and FY23 respectively.
  • SIA should finally turn operating cash flow positive in 3QFY22, in line with our expectations, but majority of operating cash flows will be used to finance its ambitious fleet revitalisation plan. 
  • We currently have a HOLD call and a TP of S$4.90 on the stock as we believe Singapore’s current reopening trajectory is largely priced in.

More updates to follow after the analyst briefing in the morning tomorrow.