Uobkayhian on 10 Feb 2014
(SIA SP/BUY/S$9.44/Target: S$10.70)
FY14F PE (x): 29.0
FY15F PE (x): 26.8
On factors affecting pax yields and outlook. SIA attributed the 1.8% decline in pax loads to lower local currency yield, a weak A$/yen as well as ongoing promotional activities. The 1.2% qoq improvement was attributed to strong seasonal demand and strong frontend loads. (3QFY is a seasonally peak period for yields). Forward guidance was still one of caution as airlines were said to be offering “aggressive fares”.
Upgrade to BUY. We believe there is too much negativity surrounding SIA and that market has not factored in two key positives - initiatives to stem cargo losses and plans for a new revenue stream, which is likely to be ancillary income. Meanwhile, the stock trades at 0.6x P/B ex-SIAEC. We lower our fair value from S$11.30 to S$10.70, valuing the stock at 0.75x P/B ex-SIAEC. Together with FY15F dividend of 26 cents/share, our new target price represents a 16% price upside.
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