Singapore Airlines - OCBC Investment 2022-08-01: Net Income Back To Black


Singapore Airlines - Net Income Back To Black

  • SIA's 1QFY23 net profit reversed from a loss to S$370.4m.
  • Overall capacity restored to 66.7% of pre-pandemic levels.
  • Forward sales remained strong up to Oct 2022.

SIA's strong 1QFY23 performance boosted by robust air travel demand

  • SIA (SGX:C6L)’s 1QFY23 (1 Apr 2022 to 30 Jun 2022) revenue tripled y-o-y or 58.2% q-o-q to S$3.9b, supported by strong travel demand following Singapore’s full openings since Apr 2022.
  • Passenger flown revenue jumped 119.3% q-o-q to S$2.7b, boosted by a 126.7% q-o-q growth in traffic. On the other hand, cargo flown revenue fell marginally by 1.5% q-o-q to S$1.1b, impacted by the lockdowns in China.
  • Operating expenditure was more than doubled y-o-y to S$3.4b as both net fuel cost (more than tripled y-o-y due to higher fuel prices and flight activities) and non-fuel expenditure (+62.5% y-o-y) increased. Consequently, operating income and net income turned into profit of S$556.4m and S$370.4m respectively, above our expectations.

SIA plans to reinstate 68% of pre-COVID passenger capacity in 2QFY23

  • SIA’s full-service carrier turned from an operating loss of S$152.6m in the same quarter last year to a profit of S$624.3m in 1QFY23 (~7x q-o-q), driven by improvement in traffic and capacity.
  • Scoot, which is SIA’s low-cost carrier, remained in an operating loss of S$51.9m but narrowed by S$82.6m q-o-q as capacity recovery for Scoot’s key markets such as Southeast Asia was catching up.
  • As of 1QFY23, SIA’s overall capacity increased by 18.5% q-o-q to 66.7% of its pre-pandemic levels (Passenger: 60.7%; Cargo: 77.0%). SIA plans to reinstate 68% of pre-COVID passenger capacity in 2QFY23 and 76% by 3QFY23.

Positive outlook largely priced in

  • SIA expects demand to remain strong with forward sales staying buoyant for S$5.84.
  • While we expect a continued recovery in air travel in FY23, we believe a large proportion of the positive outlook has been priced in, with forward price-to-book ratio trading at 1.2x (~1.5 standard deviation above historical mean).
  • See
  • We see downside risks as competitors ramping up capacity which could weigh on SIA’s yields, together with a potential slow down in cargo demand and recessionary risk in 2023.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2022-08-01
SGX Stock Analyst Report HOLD MAINTAIN HOLD 5.84 UP 5.57