SIA

SIA: Maybank-KE believes that the market is overly negative on SIA and is ignoring the strategic alliance with Virgin Australia (VA) that has entrenched its position in Australia. With this partnership, house believe that SIA is better positioned on the Kangaroo route (Australia-Europe) than other Asian carriers. Over time, house expects foreign carriers (Emirates, Etihad and SIA) that have forged strong partnership with domestic carriers (Qantas group, VA) to gain market shares over other players on this route. Data from IATA indicates a surge in premium traffic volume between Far East and Southwest Pacific of 10.6% YoY for the first four months of the year. As a leading premium carrier to the region, house expects SIA to be a beneficiary. Despite headwinds from the regional overcapacity, SIA’s share price remained resilient. This suggests fairly low market expectations and that the stock could be under-owned. Valuation remains near crisis levels even though recovery is expected ahead. Maybank-KE maintains BUY with TP of $12.00, based on 1.05x FY15E P/BV.