SIA

SIA posted another strong set of load factors for the month of May 2010. Load factors for passengers was up 7.9 points to 74.8, while cargo was up 5.4 pts to 66.6. On a MoM basis, the growth was even more significant. Passenger traffic grew by a very encouraging 12.3% YoY, while cargo traffic posted stellar growth of 16.4%. Further, this is the first time that SIA managed to grow its capacity on a YoY basis in 17 months, Passenger capacity was up by 0.5%, while cargo capacity was up 7%.

Looking ahead, our primary concern is that SIA's capacity expansion will not be able to match demand. Given the improved business conditions and higher tourism numbers, this may gives SIA some leeway to raise prices and to generate higher load factors, thereby boosting yields and profitability. Maintaining Buy recommendation with TP of $18.90, based on 1.7x P/BV.