Thursday, November 22, 2012
SIA: Nomura re-assumes coverage with a Buy, on lower TP of $12.50 (from $18.25), pegged to mid-cycle 1.1x P/B. Says earnings close to bottoming, although expects a gradual recovery ahead. Despite slow business class travel, expects the airline’s focus on market share in the passenger segment and reduction in transportation costs in its cargo segment, to drive a gradual recovery in overall yields. Notes fuel remains the single largest cost item, at 40% of 2QFY13 costs, and mgt est each US$1/bbl chg in brent oil would result in annual cost savings of $45m. Adds SIA’s valuation is backed by its solid net cash position, at $3.7b as at Sep ’12.