Singapore Airlines - CGS-CIMB Research 2022-05-19: Risk-Reward Now In Balance: Downgrade To HOLD

Singapore Airlines - Risk-Reward Now In Balance: Downgrade To HOLD

  • SIA (SGX:C6L) reported a core net loss of S$268m in 2HFY22 (Oct 2021 to Mar 2022), which is 44% narrower y-o-y and 69% narrower h-o-h, due to stronger cargo profits and lower share of associate losses, partly offset by lower deferred tax credits.
  • Our end-CY22F target price for SIA is raised to S$5.92, based on a target P/BV multiple of 0.98x (+0.5 standard deviation above the mean since 2011 of 0.92x), applied to the end-FY23F adjusted BVPS. Our previous target price was S$5.88, based on a target P/BV multiple of 1.06x (+1 standard deviation above the mean). We have reduced the target P/BV multiple after raising our earnings forecasts. Valuing SIA at a P/BV mean of 0.92x (since 2011) yields a fair value per share of S$5.56.
  • Upside risks include a faster-than-expected recovery in international passenger traffic and average ticket prices after 1 April 2022 as Singapore has opened up quarantine-free travel to fully-vaccinated travellers from around the world. Furthermore, airfreight markets remain strong given the still-choked container shipping logistics chain; China’s Shanghai region plans a release from COVID-19 lockdown from 1 June 2022F and this could stimulate air cargo volumes from the recent weakness in March and April.
  • Conversely, the significant oil price increases pose the largest downside risk. SIA is only 40% hedged at an average Brent strike price of US$60/bbl from Apr 2022 to Jun 2023F, beyond which SIA is unhedged. At the time of writing, Brent crude is trading at US$113/bbl and Singapore jet fuel at US$133/bbl, which are multi-year highs.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

Raymond YAP CFA CGS-CIMB Research | 2022-05-19

Read also CGS-CIMB's most recent report:
2023-01-16 Singapore Airlines (SIA) - Time To Pocket Share Price Gains.

Previous report by CGS-CIMB:
2022-12-06 Singapore Airlines - Merger Of Vistara & Air India ~ Better Than Standing Alone.

Price targets by 3 other brokers at SIA Target Prices.
Listing of research reports at SIA Analyst Reports.

Relevant links:
SIA Share Price History,
SIA Announcements,
SIA Dividends & Corporate Actions,
SIA News Articles

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