Singapore Air Earnings: Lifting Valuation After Another Strong Year Supported by Forward Bookings

We lift no-moat Singapore Airlines’, or SIA's, fair value estimate to SGD 7.20 from SGD 6.10 following its strong first-quarter fiscal 2024 (ending March) results and anticipated upside to free cash flow with working capital normalizing faster than expected. We now expect fiscal 2024 operating margin to be relatively stable at 14.9% versus our original 13.9% estimate. First-quarter revenue of SGD 4.5 billion, up 14% year over year, is tracking at a faster pace that our previous growth forecast of 11.8%. The first quarter is normally the weak travel demand season. Hence, based on forward bookings, we expect SIA to continuously ride on China's reopening, and strong summer holiday travel demand. However, we would wait for a more attractive entry price to buy the shares with trends pointing to increasing competition within the North Asia region, and soft cargo performance.