SIA

SIA: Several house views post-results briefing held last Friday, mainly surrounding its i) lack of recovery options and ii) its fuel hedging strategy: i) No indication of near-term profit recovery- SIA(in contrast to Cathay) is not seeing a pick-up in premium passengers and this is probably due to its higher exposure to European routes where demand is weaker and competition greater. ii) SIA has hedged 57% of its fuel exposure this FY (compared to 43% in 2H of last FY) at US$119/barrel. This means that it will not be able to enjoy lower fuel expenses if jet fuel price stays at the current spot level of US$114/barrel. Most other airlines in the region have less than 30% of requirements hedged. DB however, does not feel that SIA needs to take a view on the direction of fuel prices at this point. On the overall, UOB Kay Hian has the most upbeat report; The variance comes from a positive view of forward yields with less competition, and a decline of operating cost from SIA's fuel hedging strategy. DB has a SELL rating, TP of $9.40; HSBC downgrades to NEUTRAL, TP of $12.50; Nomura has a BUY rating, TP of $12.50 (Nomura has a relative rating system, while HSBC has an absolute rating system); UOB Kay Hian has a BUY, TP of $13.30;