Company Reports

No-moat Singapore Airlines' share price reacted negatively after December-quarter performance missed market consensus estimates. In contrast, we were positively surprised as we had factored in higher costs. Our profit forecasts assume that proportionate costs will normalize to be in line with the long-term average. So, while operating margin fell in the December quarter to 12% from 17% in the June quarter, it is comfortably above our prior assumption for fiscal March 2024. We now forecast operating margin of 12.9% in fiscal 2024 and 9.5% in fiscal 2025, both up from 10.7% and 4.3%, respectively. Our fair value estimate rises to SGD 8.60 from SGD 7.70. Following the fall in share price, we believe SIA is attractive.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption has given SIA a temporary advantage as SIA's financial strength and well planned staff resources enabled the carrier to bring out more flights to capture the rebound in travel demand.

We raise our fair value estimate on Singapore Airlines, or SIA, to SGD 7.70 from SGD 7.20 as we lift our fiscal 2026-28 earnings outlook on a higher load factor assumption that offsets a cut to our fiscal 2024-25 profit forecasts. SIA’s record fiscal 2024 (ending March) interim net profit of SGD 1.441 billion is in line with our original full-year projection, but we now expect a weaker second-half performance with higher jet fuel costs and weaker yields. SIA’s shares are currently undervalued having retreated from its 52-week high of SGD 8.05 set on June 19. For longer-term investors willing to sit through the oil price gyrations, we think select airlines, such as SIA, are attractive but fiscal 2024 is a likely profit peak. Our fair value estimate factors in a normalization in profitability to prepandemic levels, leading to three-year EPS CAGR of negative 5% given the high base in fiscal 2023.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption has given SIA a temporary advantage as SIA's financial strength and well planned staff resources enabled the carrier to bring out more flights to capture the rebound in travel demand.

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.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption is giving SIA a temporary advantage as SIA's financial strength and well planned staff resources are enabling the carrier to bring out more flights to capture the rebound in travel demand.

No-moat Singapore Airlines delivered a record-high net profit of SGD 2.2 billion for fiscal 2023 ending March, in line with our expectations. SIA definitely benefited from having a relatively intact flight crew and a healthy balance sheet able to capture the rebound in travel demand. We push back assumptions of a normalization in passenger yield and load factor into fiscal 2025, lifting our earnings estimates. However, our thesis that competition will resume is unchanged as airlines add capacity and we expect SIA’s operating margin to decline to a midcycle 5.1% in fiscal 2028, from 15.6% in fiscal 2023. Our midcycle margin forecast is close to SIA’s 2005-20 average. Our fair value estimate rises to SGD 6.10 from SGD 5.30. We continue to prefer greater upside potential from its current share price before buying the shares, but near-term performance should remain supportive for its share price.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption is giving SIA a temporary advantage as SIA's financial strength and well planned staff resources are enabling the carrier to bring out more flights to capture the rebound in travel demand.

We think no-moat Singapore Airlines, or SIA, has reached a stable recovery stage with its fiscal fourth-quarter (ending March) group passenger capacity reaching 80% of its prepandemic capacity. This roughly meets management's guidance, and is marginally below the 81.7% we had assumed. We are a touch disappointed that the opening of China has seen a slightly slower impact on passenger capacity in March, but it does not change our expectation for SIA to hit prepandemic operating levels over the next 15 months. Passenger load factors continued to exceed our expectations and hint at strong yields. Our earnings estimates and fair value estimate of SGD 5.30 are unchanged ahead of the release of its fiscal 2023 results on May 17.

We keep our fair value estimate on no-moat Singapore Airlines, or SIA, at SGD 5.30 following its third-quarter business update. SIA’s nine-month EBITDA of SGD 3,755 million makes up 74% of our full-year estimate with EBITDA margin around 60 basis points above our forecast. While the cargo segment is slightly weaker than we had assumed, we believe this will be made up by passenger demand that appears to remain firm. We are lowering SIA’s Morningstar Uncertainty Rating to Low from Medium given the improving visibility in travel demand. The low uncertainty rating is in line with SIA’s historical rating.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption is giving SIA a temporary advantage as SIA's financial strength and well planned staff resources are enabling the carrier to bring out more flights to capture the rebound in travel demand.

No-moat Singapore Airlines', or SIA's, third-quarter operation statistics for the fiscal year 2023 are largely in line with our expectations, reaching 78.3% of its prepandemic capacity. Although 78.3% is slightly lower than management's guidance of 81% by the end of 2022, as mentioned in our July 25 note, our capacity projection remains at 83% of its prepandemic capacity by March 2023. Furthermore, for the third quarter, we believe SIA is expected to continuously see a double-digit margin driven by high monthly passenger load factors, or PLF, and lower jet fuel costs. Given the share price rally since November 2022, without additional catalysts, we think SIA stock is fairly valued for now. Our fair value estimate is unchanged at SGD 5.30.

We lower our fair value estimate for no-moat Singapore Airlines, or SIA, to SGD 5.30 from SGD 5.70 due to an initial cash outflow of SGD 360 million plus the potential additional capital injection of up to SGD 880 million associated with the proposed investment into Air India, or AI. The cut in our fair value estimate largely reflects reduced cash holdings at SIA. The acquisition follows the merger of SIA’s 49%-owned Vistara and AI. SIA aims to take a 25% stake in the merged entity to capture the growth opportunity in the Indian aviation industry and create strategic synergies and scale synergies. While we think this is strategically potentially positive, we think there are risks that returns may be below SIA’s current returns on its invested capital for some time. Pending further quantifiable improvements to the current lossmaking AI and Vistara, we remain conservative about the future cash flow contribution of AI to SIA.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption is giving SIA a temporary advantage as SIA's financial strength and well planned staff resources are enabling the carrier to bring out more flights to capture the rebound in travel demand.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption is giving SIA a temporary advantage as SIA's financial strength and well planned staff resources are enabling the carrier to bring out more flights to capture the rebound in travel demand.

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.

Singapore Airlines’, or SIA’s, robust first-quarter fiscal 2023 (ending June) net profit of SGD 370 million surpassed expectations as revenge travel and more limited capacity from competitors helped lift operating margin to 14%. While revenue was generally within our expectation, costs lagged more than we assumed. SIA continues to benefit from remnant fuel cost hedges but it’s mainly the non-fuel expenses that are on the low-end of our estimates. However, we think non-fuel costs will catch up as pandemic pay cuts are reversed through the rest of fiscal 2023. We raise both our passenger and cargo yield assumptions and finetune some cost estimates leading to a 54% increase to our fiscal 2023 net profit forecast to SGD 732 million. However, our fiscal 2024 earnings forecast is little changed. Our Uncertainty Rating is lowered to Medium from Very High to reflect reduced financial risks and a more stable profit outlook.

Singapore Airlines, or SIA, is Singapore’s flagship carrier with a strong brand based on superior cabin service. However, the company’s dominance had been weakened in the prepandemic years by low-cost carriers, or LCCs, and the aggressive overseas expansion of the middle east's national carriers and Chinese airlines. While SIA has been building its discount brand Scoot, the proliferation of LCCs, however, made it difficult for SIA to maintain its market share and margins at the same time. However, we think the coronavirus disruption is giving SIA a temporary advantage as SIA's financial strength and well planned staff resources are enabling the carrier to bring out more flights to capture the rebound in travel demand.

Singapore Airlines, or SIA, reports its fiscal first-quarter (financial year ending March 2023) performance on July 28, and given its operating statistics for the quarter so far, we’re expecting a strong top-line result. SIA’s guidance for capacity to return to 81% of the pre-COVID-19 level by end-2022 is one quarter ahead of our assumption. Also, both May and June capacity and load factor are above our expectation, which we believe reflects the strong appetite for travel as more borders open and COVID-19 quarantines and testing requirements are relaxed. Group airlines’ passenger load factor for June reached 85.5%, same as the travel peak month of December 2019. As of end-June, SIA group capacity has recovered to 63.3% of pre-COVID-19 capacity. If we adjust our inputs to reflect the solid first-quarter capacity and load factor statistics, the upside potential to our current fair value estimate of SGD 5.60 would be around 4.4%. Pending the release of both yield and cost numbers, however, we keep our fair value estimate and earnings forecast unchanged. Higher costs could weigh on SIA for the balance of fiscal 2023.

We raise our fair value estimate for Singapore Airlines, or SIA, to SGD 5.60 from SGD 4.76 with a pickup in air travel, as COVID-19 rules relax, leading to better load factors. The strength of the recovery exceeded our expectation with April load factor up to 72.7% for the group. As the airline adds flights, we now expect SIA to reach 81% of pre-COVID-19 capacity by end fiscal 2023, bringing forward our recovery expectation by one year. However, we believe net profit improvement will be pressured by high fuel costs and rising wages. This is expected to cap operating margin at 4.4% and 3.8% in fiscal 2023 and 2024, respectively, which is below 2005-2020 average of 5.7%. We still see SIA as being fairly valued and prefer ST Engineering as a proxy to the recovery in air travel.