Singapore Airlines

Although Singapore Airlines (SIA) reported mixed performances across the group in 2QFY2020, analysts are still remaining positive on the stock.

In its 2QFY2020 results, SIA’s earnings came in at $94.5 million, 70% higher y-o-y, owing mainly to higher contributions from associates and joint ventures of $78 million. Revenue increased 5.3% y-o-y to $768.5 million, driven mainly by growth in passenger-flown revenue, although the top line was dragged down by lower cargo-flown revenue.

The way Maybank Kim Eng Research sees it, SIA has been able to navigate the challenging macroeconomic conditions better than its peers, owing to its fuel hedge and cost-efficient operations. However, it forecasts that the group will see lower profits this year.

“SIA is able to fill up its passenger capacity convincingly. However, this is at the expense of low yields and therefore suggests [that] the market is still fragile,” says analyst Mohshin Aziz in a Nov 6 report. The analyst also cautions that the aviation sector is undergoing one of its most challenging periods, owing to overcapacity and a relatively subdued market.

For now, Chu Peng, an analyst at OCBC Investment Research, believes SIA’s passenger bookings are expected to remain healthy in the near term, driven by its long-haul flights to the US. Meanwhile, DBS Group Research analyst Paul Yong notes that SIA’s transformation programme is paying off.

On the other hand, CGS-CIMB Research warns that the weakening global economic growth and ongoing US-China trade war could slow SIA down. Analyst Raymond Yap notes that SIA’s airfreight demand and yield have been negatively affected since late 2018.

However, he adds: “So far, SIA mainline has not seen weaker premium demand despite slowing global economic momentum.” —