SIA

SIA: 2QFYMar13 results. Maybank KE says the results will be disappointing to the mkt; Deutsche considers the numbers within its expectation but notes 1H13 net profit was only 35% of consensus, hence there could be downside to consensus forecasts. 2Q13 net profit was $168m, -54% yoy, affected by non-operating items (timing of disposal of aircraft and spares) and poorer operating profit. Operating profit was down 43% yoy to $70m, as revenue growth of 2.5% yoy did not keep pace with operating cost increase of 4.1% yoy. The cargo business continued to register a loss of $50m, similar to 1Q. Pax traffic was up 6.5% yoy in 2Q and load factor was a high 79.8%. The key issue was the 2.6% yoy decline in pax yield in 2Q. Cargo traffic also fell 3.8% yoy in 2Q. Operating expense was driven by fuel (+4.3% yoy) and staff costs (+6.3% yoy). Interim dividend was cut to 6cts/sh, down from 10cts/sh previous year. SIA ended Sep 2012 with net cash of $4.1b, compared with $4.4b qoq. Deutsche forecasts full yr DPS of $0.18/sh. The airline continues to have a cautious outlook on the business saying that they are experiencing downward pressure on loads and yields of both passenger and cargo businesses. High jet fuel prices exacerbate the situation. SIA has decided to park one of its 13 freighter aircraft as a result of the weakness in demand. Deutsche says at 1x FY13e P/E, valuation does not look compelling vs the 2-3% FY13-14e ROE. Maintains Sell with TP $8.65. UOBK maintains Sell with TP $9.10, sees further derating on below consensus earnings. CIMB keeps at Neutral with TP $11. Morgan Stanley expects the share price to react negatively to surprisingly weak 2Q12 results. JPM stays Overweight with TP $13, tips potential for special div next May.