SIA

SIA: 1QFYMar13 results in line with Dow Jones consensus (though the wide range in estimates means SIA would have outperformed about half the houses and underperformed the other half). Net profit was $78m, +75% yoy, and a turnaround from the $38m loss qoq. This came as fuel costs (-6.6% yoy, -7.1% qoq) declined faster than drop in yields (pax yield -3.4% yoy, -2.6% qoq, cargo yield -2.8% yoy, -1.7% qoq). Pax load factor also improved to 79.5% (4QFY12: 77.6%, 1QFY12: 75.6%), while cargo load factor firmed up at 62.9% (4QFY12: 61.9%, 1QFY12: 64.7%) likely supported by capacity growth cuts. Street views are mixed. Nomura maintains Buy with TP $18.25, says positive that FY13 is on to a good start with the seasonally weak 1Q13 having outperformed. Believes this may have positive read across to the 2QCY12 results of other airlines that have yet to report, incl Cathay Pacific (293 HK). Deutsche maintains Sell with TP $8.65, says to focus on declining yields as travel demand outlook has been negatively affected by the European debt crisis and sluggish recovery in the US economy. Believes promotional efforts will continue and add downward pressure on yields. Notes the 2% net margin in the quarter can be easily wiped off by a further 2% qoq deterioration in yields. Citi also maintains Sell with TP $9.40, says the yield erosion “looks disturbing”, and may prompt Street earnings downgrades. Adds, mgt’s downbeat outlook guidance suggests lack of catalysts.