SIA

SIA: CS upgrades to O/p from neutral based on the increasingly benign effects of lower jet fuel prices, sustained demand growth and data supporting a recovery in business travel demand and an associated improvement in yields. The biggest kicker, however, could come from a pick-up in passenger yield as corporate travel revives. House note the robust correlation between yield, stock market and business confidence cycles, with this year's SGX performance suggesting a recovery in front-end demand, should be apparent even in 1Q FY14 results. Add that SIA and Cathay Pacific have historically moved closely together, although this relationship has broken down over the past 18 months. Believe that the relationship will re-establish itself based on their mutual exposure to premium traffic. Currency changes lift house target price from $12.60 to $12.80, representing 31% return (with dividend yield) and equivalent to FY14E EV/EBITDAR of 4.9x, P/E of 18.9x and EV/CFMV of 123%.