Singapore Airlines - Emerging Victoriously From The Pandemic

Singapore Airlines - DBS Research 2022-08-01: Emerging Victoriously From The Pandemic

SGinvestors.io

Published: 2022-08-06 08:18 PM

SINGAPORE AIRLINES LTD (SGX:C6L)

Singapore Airlines (SIA, SGX:C6L) returned into the black again in 1QFY23 (1 Apr 2022 to 30 Jun 2022) with a net profit of S$370.4m, a solid sequential improvement from net losses of S$209.9m in 4QFY22. 1QFY23 net profit accounted for 71.7% and 56.5% of consensus and DBS’s full-year estimate respectively.
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Cargo revenue dipped on q-o-q basis to S$1,096.m (-1.5% q-o-q, +25.2% y-o-y) as a slight improvement in cargo yields tempered softer cargo volumes.
Operating profit of S$556.4m in the quarter was the second highest in SIA’s history; the group recorded an operating cash surplus of S$1,480m in the first quarter.

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Demand for flights to the Greater China market only strengthened slightly following the easing of travel restrictions. Travellers are still avoiding the market given that travel measures in the region are still among the world’s most onerous.
Forward booking data suggest passenger demand will remain buoyant into the holiday season; passenger yields should at least hold at elevated levels until 3QFY23F.
Management is still deliberating on capital allocation/deployment as the recovery is still in a nascent stage. SIA is still evaluating its options with regards to the redemption of the mandatory convertible bonds and will consider paying out dividends again if profitability can be sustained.
Corporate travel has rebounded but has not reached pre-COVID19 levels. SIA's management shared that there has been a lack of inventory for corporate travellers over the past few months as this customer profile tend to book their flights late, but most flights were sold out early.
Fuel hedging ratio falls off after 1QFY24. SIA has hedged about 40% of their projected fuel consumption over 2QFY23 to 1QFY24. However, the management indicated that there are limited hedges in place after 1QFY24.