Maybank Kim Eng Research 2015-07-30: Singapore Airlines - No Surprises; Hoping on Fuel. Maintain HOLD.

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. 
(Mohshin Aziz)

Source: http://www.maybank-ke.com.sg/