1QFY16F: Just coasting around
- 1QFY16 results on 29 July. Expect core net profit of SGD92m (+270% YoY, 76% QoQ), well below SGD100-200m during a ‘normal’ year.
- Demand is stagnant but low fuel price could be the next catalyst for growth. Further industry consolidation in 2H and pick-up in the cargo market should improve outlook.
- On balance, maintain HOLD as current share price presents little upside to our target price of SGD12.40.
What’s New
- Singapore Airlines’ (SIA) 1QFY16 operating statistics were generally in line with our expectations with the exception of load factor, which was a touch bit lower.
- System traffic contracted by 0.9% YoY and load factor decreased by 1.4ppt to 80.0%.
What’s Our View
- The takeaway from the 1QFY16 operating statistics is SIA is feeling the effects of regional competition.
- Both Malaysia and Indonesia have seen a weaker YoY Mar-Jun quarter and Singapore is sucked in into this storm.
- Although our 1QFY16 numbers look great when compared YoY, they are far lower than the normal profit range of SGD100-200m that SIA achieves during normal years.
- The outlook for the subsequent quarter should be moderately better as the industry will begin to consolidate capacity in 2H15 and the cargo market is picking up.
- Furthermore, fuel price is trending down and Changi airport has provided incentives that will help to reduce cost.
- Our earnings forecasts and target price of SGD12.40 are unchanged pending results and the analysts briefing.
- Maintain HOLD as there is limited upside to our target price.
(Mohshin Aziz)
Source: http://www.maybank-ke.com.sg
