SIA

SIA: CLSA maintains O/p with $12.15 TP. Note that SIA is now more focussed on the regional markets for growth than past long haul attention. While competition from the Middle EAst remains intense, this is not a new development and their network into Asia is still appealing to European passengers. House have seen the Scoot brand as unsustainable on its own, and now the joint marketing of flights with Tiger should help boost passenger flow and reduce losses, even though it will not be seamless travel initially. Overall, maintain O/P call on SIA with as growth remains above expectations. Add that despite the airline industry facing operating headwinds, SIA is trading at distressed valuations. The long term average forward PBx is 1.4x and whilst competition has increased the current 0.94x is well below the five-year average of 1.2x. Believe that SIA’s diversified exposure will see it maintain earnings above expectations and see returns recover towards 10%.