No Surprises; Hoping on Fuel
1QFY16 core earnings in line.
Believe earnings recovery has been priced in.
Maintain HOLD with unchanged target price of SGD12.40, pending analyst briefing on Friday (31 Jul).
What’s New
- 1QFY16 core net income of SGD91.8m (+270% YoY, +76% QoQ) was in line at 12% of our FY16F and 11% of the Street’s. 1Q is seasonally weak, typically contributing 10-15% to the full year.
- Group load factor dipped 1ppt YoY to 76.8%.
- Yields were generally mixed, with long-haul yields down 1.8% YoY while short-haul yields held steady.
- Unit costs declined 2.0% YoY, thanks to lower fuel prices.
- Associates and JVs fared lower, with a combined loss of SGD7.8m, up from -SGD2.6m a year ago mainly due to start-up losses at Vistara Air.
What’s Our View
- The coming quarter should be moderately better as regional competitors in Malaysia and Indonesia streamline their capacity in 2H15.
- This will, hopefully, reverse or stabilise SIA’s declining yields in the past three years.
- Furthermore, fuel prices are trending down and Changi Airport has provided incentives to help airlines reduce their costs.
- We keep our EPS, TP of SGD12.40 and HOLD rating pending its analysts’ briefing on Friday, 31 Jul.
Source: http://www.maybank-ke.com.sg/
