SIA

SIA: reported its worst quarter in almost two years, as 3QFY14 net profit slumped 65% to $50m, disappointing already weak expectations. The bottom line was dragged by a one-off payment of US$78.3m by SIA Cargo related to a legal case settlement in the US over alleged involvement in a global cartel, a US$2.3m fine imposed by the Swiss Competition Commission against SIA Cargo, as well as associate losses from Tigerair. At the operational level, profits rose to $151m. Turnover was flat at $3.88b, despite higher passenger numbers, as competition kept yields down (-2.7% y/y). The airline was also affected by unfavourable exchange rate movements on major revenue generating currencies. Credit Suisse believes that the losses contributed by SIA’s freight and portfolio businesses further entrench its view that SIA’s corporate strategy contains manifest flaws. Cuts TP to $10.80 (from $11.30), and maintains its Neutral rating. Despite the current share price weakness, Deutsche does not encourage investors to buy the stock. Despite having a $4.2b net cash pile, the house doubts the company will pay out a special dividend given its cautious outlook statement. Rates at Sell with TP $8.80. CLSA rates at Underperform with TP $10.58, sees bigger returns else where on the back of falling markets.