Singapore Airlines

UOBKayhian on 31 Jul 2014

FY15F PE (x): 62.0
FY16F PE (x): 32.4
71% decline in 1Q net profit and clearly below consensus estimate. 1Q’s net profit amounted to just 6% of full-year net profit target. The 71% decline in group net profit was due to: a) weak pax yields resulting in a 50% decline in parent airline’s op profit, b) losses from 40%-owned Tigerair, c) a 24% decline in SIA Engineering’s PBT, and d) 85% decline in Silk Air’s op profit.

Cautious guidance. SIA warned that the outlook has “become more challenging with continuing uncertain global economic climate, geo-political concerns in the region”. We reckon that SIA was referring to demand destruction in the wake of Thailand’s military coup and the decline in Chinese visitor arrivals in the wake of MH370. Maintain HOLD but lower our target price to S$10.40.