SINGAPORE AIRLINES LTD (SGX:C6L)
Singapore Airlines - Gradual Recovery Ahead
- SIA's PATMI loss narrowed in 3QFY21.
- Monthly cash burn reduced to S$250m.
- Strong cargo performance.
SIA's 3QFY21 PATMI loss of S$142m
- Singapore Airlines (SIA, SGX:C6L) released 3QFY21 business updates which were above our expectations. 3QFY21 revenue fell 76.1% y-o-y to S$1.1b due to continued weakness in passenger flown revenue (-95.0% y-o-y), but partially offset by higher cargo and mail revenue (+42.4% y-o-y).
- While PATMI remained in loss this quarter, it narrowed from a record loss of S$2.3b in 2QFY21 to a loss of S$142m in 3QFY21, helped by a net gain of S$63m on fuel hedging and fuel derivatives, lower expenditure and tax credit.
SIA plans to reinstate 25% of pre-COVID-19 levels by Apr 2021
- Passenger traffic shrank 97.6% y-o-y for all three airlines but improved 44.7% q-o-q on the back of a 90.8% increase in capacity for 3QFY21.
- As of Dec 2020, SIA resumed 19% of pre-COVID-19 capacity and plans to reinstate 25% and 45% of pre-COVID-19 capacity and city links respectively by Apr 2021.
Cargo expected to remain strong
- Cargo continued to outperform passenger business due to strong cargo demand, airfreight capacity crunch and increased frequencies of cargo-only passenger aircraft deployment. We expect air cargo to benefit from the recovery of global economy, e-commerce and shipment of vaccines in 2021.
- Cargo yield could further improve given continued capacity crunch as it needs time for passenger travel to restart and to restore belly capacity.
Long road to recovery but worst is likely over
- As of 31 Dec 2020, SIA’s cash stood stable at S$7.1b. SIA has increased its liquidity by ~S$12.7b in 9MFY21. Cash burn has reduced from S$300m per month in 2QFY21 to S$250m per month this quarter, with near-term target to be S$200m per month as operating environment improves.
- Assuming a cash burn rate of S$200m per month, SIA’s current cash position will likely last the airline for ~3 years.
- While we expect domestic travel to recover first, followed by regional, and international travel, SIA is poised to benefit from Singapore’s progressive re-opening and the roll-out of vaccines in 2021, in our view.
- After adjustments, our fair value estimates for SIA increases from S$3.70 to S$4.80, based on P/B multiple of 0.87x.
- See Singapore Airlines Share Price; Singapore Airlines Target Price; Singapore Airlines Analyst Reports; Singapore Airlines Dividend History; Singapore Airlines Announcements; Singapore Airlines Latest News.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2021-02-08
SGX Stock
Analyst Report
4.80
UP
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