SIA

SIA: HSBC still likes SIA and says the airline’s strengths are overlooked due to recent lackluster track record. SIA has suffered from many problems beyond its control, e.g. intensified competition of stopover routes between Europe and Australia, stronger S$ (removing cost advantages), higher fuel prices and increased LCC competition. These, plus arguably problematic product decisions caused SIA to underperform its nearest peers in terms of passenger yield performance. That said, HSBC underscores its potential to be a long term winner as market liberalises. Operating out of the best ASEAN hub, SIA is amongst few that boasts a balance sheet strong enough to maintain a modern long-haul fleet – crucial in a high fuel price environment. Cash flow generation is robust, too. HSBC expects bottomline to recover in FY15e and 16e, and says it’s a good time to buy given P/B is near all time lows, and this, historically, is a good time to buy. The house also expects the surplus cash balances to be unlocked. HSBC reiterates O/W, with TP $12.5. Citing a 0.8x FY14e (near all-time lows), the house is compelled by valuations.