Singapore Aviation Services - Maybank Kim Eng 2019-04-15: Jan-Feb 2019 ~ Where Did The Chinese / ASEAN Tourists Go?

Singapore Aviation Services - Maybank Kim Eng Research | SGinvestors.io SATS LTD. (SGX:S58) SINGAPORE TECH ENGINEERING LTD (SGX:S63) SIA ENGINEERING CO LTD (SGX:S59)

Singapore Aviation Services - Jan-Feb 2019: Where Did The Chinese / ASEAN Tourists Go?


Visitors still slow but the hub continues to grow

  • Singapore visitor arrivals for Jan-Feb 2019 grew a tepid 2% y-o-y continuing the growth slowdown trend (4Q18 2.4%). China and ASEAN arrivals were flat but compensated by a strong showing from US and Europe.
  • The “Terminal 4” effect of growing Changi as a regional hub is still playing out passenger throughput growth at 5.1% outpacing arrivals.
  • We remain positive on the sector in the medium term and are BUYers of all 3 stocks in declining order of preference of SINGAPORE TECH ENGINEERING LTD (SGX:S63), SATS LTD. (SGX:S58), SIA ENGINEERING CO LTD (SGX:S59).



CN arrivals sluggish; ASEAN weaker than expected

  • China visitor arrivals was flat (+0.1% y-o-y) for Jan-Feb 2019, still sluggish, but a better-than-expected sequential improvement from the 3.7% decline in 4Q18 from the weakening economy, a weaker RMB and falling consumer confidence.
  • Somewhat surprising was the also weak ASEAN bloc which was flat y-o-y driven by 2.3%/5.8%/2.1% declines from Indonesia/Thailand/ Vietnam arrivals offsetting growth from Malaysia, Philippines and smaller markets.
  • Our 2019 outlook for overall visitor arrival growth is c.3% and Changi passenger movement c.4% y-o-y.


The west rides to the rescue

  • Although China and ASEAN were flat for Jan-Feb 2019, overall arrivals grew 2% with Americas/Europe, which account for c.20% of total visitors, growing 7.2%/7.8%.
  • Also noteworthy is that UK, the largest component of European arrivals, grew 11.3% y-o-y (signs of early mover Brexiters?).


Medium term secular trends remain sound

  • Short term seasonal and cyclical factors aside, we remain positive on the broader industry drivers for aviation services in the region for the coming 3-5 years. IATA, industry consultants and major OEMs (Airbus, Boeing) estimate global commercial aircraft fleet growth at c.3-4% CAGR (c.4.5- 5% for Asia Pacific) over the next decade with services growth tracking similar levels.
  • Development of airport infrastructure in APAC secondary and tertiary cities, rising affordability, growth in low cost carrier fleets and rising passport penetration, currently just at single-digit levels in populous countries of China, Indonesia and India are expected to be the key drivers of this expanding market.






Neel Sinha Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-04-15
SGX Stock Analyst Report BUY MAINTAIN BUY 5.800 SAME 5.800
BUY MAINTAIN BUY 4.250 SAME 4.250
BUY MAINTAIN BUY 2.850 SAME 2.850



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