UOBKayhian on 17 Sept 2013
FY13F PE (x): 23.2
FY14F PE (x): 19.2
The best traffic growth in 2013 ... Pax traffic (RPK) growth of 8.6% yoy was SIA’s highest in 2013 and SIA attributed the improvement to strong leisure demand during the Hari Raya period as well as the return of the
summer holiday travels. The number of pax carried rose 11.7% yoy, higher than RPK growth, which implies that passengers were on average travelling for shorter distances.
... with broad-based improvement in load factor. Pax load factor rose 4.1ppt, again registering the biggest increase for the year. Most notable was the 6.3ppt increase in loads to Europe. At 88.1%, this was the best
load since 2008, suggesting an economic recovery in the region. North America, another key market, saw loads of 88.9%, marginally lower than Cathay Pacific's 92.7%. The improvement in long-haul loads holds scope for better front-end loads, leading to overall improvement in yields.
Maintain HOLD and increase our target price to S$11.50 (from S$10.80), valuing the stock at 0.8x forward book value (ex-SIAEC) and adjusting for its fair value stake in SIA Engineering. The higher valuation reflects better-than-expected traffic growth, particularly in Europe routes. Our target price reflects 1x FY14F book value.
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