4QFY22 results in-line; recovery prospects are turning brighter despite some challenges
<Results First Take> Singapore Airlines (SIA SP): 4QFY22 results in-line; recovery prospects are turning brighter
- 4QFY22 net loss came in at S$209.9m (vs net loss of S$661.9m in 4QFY21 and net profit of S$84.7m in 3QFY22). Full-year net loss came in at S$962.0m, in line with consensus’ estimate of a S$954m net loss.
- 4QFY22 revenue of S$2,471.9m was up 6.7% q-o-q and 121.7% y-o-y. Softer sequential improvement in 4QFY22 was due to a decline in air freight volumes and cargo yields, but offset by a significant increase in passenger volumes.
- The group generated positive operating cash flow (before interest payments) of S$3,041.5m in FY22, up significantly from a net cash outflow from operations of S$3,292.4m in FY21.
- Group passenger capacity expected to reach 61% of pre-pandemic levels in 1QFY23, and 67% in 2QFY23; forward bookings (three-month window) as a % of total capacity is fast approaching pre-COVID19 levels.
Highlights
- Group passenger traffic (measured in RPK) reached 55% of pre-pandemic levels in April-22, up significantly from 24% in January-22.
- Passenger load factors also showed considerable improvement to 72.7% in April-22, up from a mere 40.0% in January-22.
- Passenger yields continued trending lower to 12.0cts per RPK in 4QFY22 (vs 12.9cts in 3QFY22 and 25.0cts in 4QFY21) as airlines restored more capacity, but remained significantly above pre-pandemic levels of 9.5-10.0cts.
- The group shared that it expected passenger capacity to reach 61% and 67% in 1QFY23 and 2QFY23 respectively, up from 52% in 4QFY22.
- SIA’s cargo division was negatively impacted by weak manufacturing activity in China, with cargo volumes down by 14% q-o-q.
- On a positive note, cargo yields remained very healthy at 78.2cts per CTK in 4QFY22, as compared to 81.5cts in 3QFY22 and 61.4cts in 4QFY21.
- The group recorded strong operating cash flow of S$3,042m in FY22, primarily driven by an improvement in its core operations and favourable working capital changes (marked increase in forward bookings).
Our thoughts
- The q-o-q deterioration in SIA’s bottom line was largely in line with expectations as the fourth quarter is a seasonally weaker quarter for cargo and jet fuel prices spiked during the period.
- Further passenger and cargo yield compression is to be expected going forward, but yields should remain notably above pre-pandemic levels on substantial pent-up travel demand, especially in the premium leisure segment and protracted supply chain bottlenecks.
- SIA’s April-22 operating statistics was very encouraging (group passenger traffic soared to 55% of 2019’s level), and we believe passenger traffic could normalise faster than what we initially envisaged.
We currently have a BUY call and TP of S$6.20 on SIA. More updates to follow after the analyst briefing in the morning tomorrow.