SIA

SIA: Announced several key initiatives: a) a codeshare with Taiwanese carrier EVA Air to provide three daily flights between Singapore and Taipei, b) 40% associate Tigerair’s JV with China Airlines to expand into Taiwan, Japan and Korea, as well as Tigerair’s interline agreement with SpiceJet, and c) a 49% JV between Scoot and NOK Air. While positive, UOBK does not expect earnings to show a marked improvement in the near term. Earnings could disappoint, as SIA’s passenger load factor (PLF) declined 0.7ppt yoy to 77.0% in Nov 13, while Oct-Nov 13 load factors stood at 77.8%, flat yoy. Cargo load factors in Nov 13 were down 2.3ppt yoy to 63.8% while Oct-Nov 13’s were down 1.3ppt yoy to 63.7%. This, coupled with guidance for lower yields, suggests that 3QFY14 earnings will show a yoy decline. Meanwhile, SIA has agreed to a $78.5m settlement with the US Air Cargo Class Action, relating to price fixing charges. 3QFY14 earnings will likely reflect the provision. The $78.5m provision will impact FY14’s PBT by 15%. Overall , downside risk is expected to be limited as SIA (ex-SIAEC) is trading at just 0.69x P/B. UOBK maintains Hold with TP $11.40. Potential entry price at $10.00, which is at 15% required return to TP.