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SIA - Cargo shows further improvement
Singapore Airlines (SIA) posted a sequential rebound for its June 09 passenger load factors, hitting 75.7 versus 66.9 in May. Although YoY this was below June 08’s 79.2, this is still a strong showing in the current market environment. The load factors were also boosted by SIA’s capacity cuts to match demand – passenger capacity has been cut by 14.4% YoY, while passenger loads have fallen 18.2%.
On a sequential basis, passenger loads were up by 9.1%, partly due to the school holidays – however, the sequential boost this year is higher than the usual seasonal 3-5% of previous years, which probably indicates that passenger loads are picking up off the lows of May, which were impacted by H1N1 fears. Cargo posted a load factor of 62.9, on the back of a 20.8% reduction in loads, matched by a 22.3% drop in capacity, to actually post a YoY improvement of 1.3 ppts. Thisreinforces the trend that the business may have bottomed out, with a consecutive improvement of 1.7 ppts in load factors.
These latest numbers reinforces our belief that the worse of the H1N1 flu scare may be over, as air travel returns to non-crisis conditions. While we reiterate that this may not entirely indicate that SIA is out of the woods, and that the situation remains very fluid, we believe that the signs are encouraging.
We are leaving our full year load factor and yield assumptions unchanged, and maintaining our FY10 earnings forecasts at S$865m. We also maintain our Buy call on SIA, with a target price of S$14.70, based on 1.2x book value. Despite weak business conditions, SIA is well equipped to weather the downturn, and investors continue to recognise the quality of this blue chip investment.
Potential longer-term value in SATS: Stock is effectively trading cum dividend of S$1.77/share. Buying SIA now entitles shareholders to 0.73 SATS share for every 1 SIA share. Although shareholders may not necessarily realize the value of SATS near term due to potential share overhang as free float would rise from 19% to 45%. However, applying mid-cycle airport valuations on SATS of c.18x P/E would imply a potential fair value of c.S$2.40/share longer term.
Long-term prospects: SIA is one of the best-managed airlines with strong pricing power and a highly efficient cost structure in our view. It is also the only Asian airline with a net cash balance and has been returning more capital to shareholders in recent years. However, we believe SIA is a mature airline with more limited growth prospects than Cathay and its market share at its home base should gradually diminish as low cost carrier penetration grows. We see risks entering M&A deals that may not be value-enhancing.
PT, valuation, key risks: We have raised our PT to factor in SIA’s improving earnings outlook in the next 12 months. Our ex-div Jun 2010 PT of S$14.7 is based on 1.2x P/BV, SIA’s average valuation since 2003 when its competitive environment intensified with the entry of low cost carriers and Emirates' increased presence in Singapore. Key risks: 1) WHO issues travel restrictions due to Influenza A, 2) stagflation, 3) making value-destroying investments
Hurry up dividen SGD 0.20 Final One-Tier-Tax + 0.73 SATS share for every 1 SIA share. XD on 13 aug 09 
When last few days of XD share will be going high 
888888888888888......
这次一定會è´ã€‚。。
å‘财了ï¼ï¼ï¼
我è¦å‘è´¢!!
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28-Jul 2009 Tuesday
10:44 PM (5437 days ago)
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