SIA Resumes Dividend; Macroeconomic Risks on the Horizon

No-moat Singapore Airlines, or SIA, reported stellar first-half fiscal 2023 (year ending March) results that were largely anticipated but its dividend payout resumes, giving its share price a boost. We revised our earnings higher, with the interim earnings of SGD 947 million making up 44% of our fiscal full-year 2023 forecast of SGD 2.1 billion. SIA’s management expects robust operation statistics for the second half of the year, but for some macroeconomic pressures to weigh in fiscal 2024 due to recession risks. This is in line with our assumptions for yields and load factors to ease. While we lift fiscal 2023 profit, our fair value estimate is slightly lowered to SGD 5.70 from SGD 5.80 on faster normalization in cargo yields. While we believe SIA’s share price would continue to be supported as it trades at 0.8 times price/book—which is below its historical average of 1.0 time—we would prefer more buffer before buying the shares.