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.