- Singapore Airlines (SIA, SGX:C6L)’s 1QFY23 (1 Apr 2022 to 30 Jun 2022) core net profit of S$322m outperformed expectations as it made up 55% of our previous FY23F estimate and 96% of Bloomberg consensus. This was mainly due to the reopening of Singapore’s borders from 1 Apr 2022 catalysed a doubling of SQ’s RPK (revenue passenger kilometre) demand in 1Q23 from the immediately-preceding 4Q22, with PLF (passenger load factor) rising from 49% to 82.4%.
- - Read this at SGinvestors.io -
- - Read this at SGinvestors.io -
- Reiterate HOLD call on SIA with a higher target price of S$5.89 (at mean FY23F P/BV of 0.95x) as we raise our FY23F core net profit forecast by 84%, still based on an unchanged target P/BV multiple of 0.95x (mean since 2011), applied to the end-FY23F adjusted BVPS (book value per share). Our reported BVPS forecasts treat the S$9,693m mandatory convertible bonds (MCB) as wholly equity, in line with the accounting treatment adopted by SIA.
- We are applying the P/BV mean to derive our target price for SIA because we think that the risks and rewards of owning the stock are now in balance – with strong near-term demand, high airfares and increased market shares across most regions potentially offsetting higher operating costs from pilot salary restoration and the spike in jet fuel prices.
- Downside risks include higher oil prices with SIA only 40% hedged until Jun 2023F and stronger competition as other airlines ramp up their capacity restoration; we have modelled this scenario in our FY24-25F forecasts, which reflect lower earnings.
- SIA likely to redeem half of the MCBs, in our view.
- Read more at SGinvestors.io.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Raymond YAP CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-07-29
Read also CGS-CIMB's most recent report:
2024-01-09 Singapore Airlines - Upgrade To ADD For Big Returns Over Half Year.Previous report by CGS-CIMB:
2023-11-08 Singapore Airlines - Somewhat Overcast Skies Into 2HFY24.Price targets by 5 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
Singapore Airlines - Excellent 1Q23; All The Pieces Fall Into Place
SINGAPORE AIRLINES LTD (SGX:C6L)
