Lim Hui Jie Tue, May 24, 2022
DBS Group Research’s Paul Yong and Jason Sum have maintained their “buy” call and target price of $6.20 on local airline carrier Singapore Airlines (SIA) as they expect the company to recover faster than its regional peers.
Despite its 4QFY2022 ended March being in the red, the analysts say this is within expectations, and highlighted the fact that passenger revenue surpassed cargo revenue, as well as that SIA was now in a cash surplus position. SIA also managed to narrow losses significantly for FY2022, on the back of improved passenger traffic.
Sum and Yong note that SIA’s international passenger traffic has been recovering at a faster clip than its peers since Singapore launched its first Vaccinated Travel Lane (VTL) in September 2021.
“We expect this trend to persist and envisage the group’s passenger traffic hitting 72% and 97% of 2019 levels by end-FY2023 and end-FY2024, respectively, supported by Singapore’s new Vaccinated Travel Framework and the synchronised reopening of borders in the region and other key markets.”
Furthermore, the “colossal” pent-up travel demand and the gradual restoration of passenger capacity will support passenger yields, they say.
At the same time, cargo yields should remain high in the near-term due to prolonged widespread supply chain disruptions.
As for its share price, the analysts say that SIA’s valuation may be above its historical mean, but still cheaper than competitors in the region.
The airline is currently priced at a FY2023 P/B ratio of 1.2x, at around 1 standard deviation (SD) of its 10-year mean.
Hi Jess, Thanks for the comments. I do not agree with DBS on SIA, its currently trading above the average PB and it has the outstanding MCB as well which will heavily dilute shares in the years to come if they fail to redeem it within the next few years. But of course, this is just a sharing of views.
I like to hear the views of other analysts as i may have my own blind spots as well. Those who known me knows that i am not a SIA fan as an investor, only as a customer. I got the shares before covid strikes. But i exercised the rights at $3 and my breakeven price was around $4.80. The first batch that i had bought was about $8.50. I have already sold the position in view of the outstanding MCB in the market at $5.20 after it recovered in price.
I can sense that you are pretty emotional about the article. “Is this another advertisement to help government promotions?” First and foremost, to put things in perspective, when it comes to investing, one has to avoid emotions as much as possible. I have lost big time in Sembmar as well and if you heard what the management was saying two years ago, you will be frustrated. I sold the position, booked the lost after the CFO sold his shares 2 years ago. I am angry? maybe. But its water under the bridge and these events are part and parcel of investing.
Anyway, thanks again for the comments.
Lost about $1 billion still good? This amount can buy many MNC companies. First half this year still big lost and second half won’t recover much. The pilots high allowances and sky high salary are more than doubled on June. The air stewardess highly paid and very high allowances also more than double die to the pilot and workers union contracts agreements due in May. Oil, food, all had increased too. Is this another advertisement to help government promotions?