SIA

SIA: CIMB maintains Neutral with $11.00 TP. House believe that equity purchase of Virgin Aus formalises the link between the two Co’s which entered into a long-term partnership last year. The benefits to SIA’s bottomline are unlikely to be significant in the near term although it will be gaining a more profitable associate at the expense of a less profitable one (Tiger). House this transaction as SIA’s method of combating the proposed Qantas-Emirates alliance as it is likely to give SIA additional feed traffic in the future for both Europe and Asia. Overall, view this transaction as fairly low risk as it will take up just 3% of SIA’s outstanding cash, leaving room for SIA to make further stake purchases if necessary. However, for house to turn more positive on the stock, SIA has to show it can more effectively combat the low-cost carriers in the region