SIA

SIA: Maybank-KE raises EPS by 18-42% between FY15-17e on lower fuel-price assumptions, as oil price has corrected to their lowest levels since Jun’12, on oversupply anxieties. According to press reports, Saudi Arabia has cut its official crude selling prices, suggesting that the price downtrend could be sustainable. Jet fuel prices have declined 18% YTD to US$105/bbl. With fuel at ~40% of expenses, Maybank-KE expects SIA to be a major winner. Maybank-KE’s sensitivity analysis suggests every US$5/bbl decline in jet fuel prices could add $0.17 to FY16e EPS, other things equal, while 52% of SIA’s FY15e jet fuel needs has been hedged (SIA can hedge up to eight quarters ahead). Maybank-KE’s estimates are substantially above consensus, citing its belief that the street has yet to factor in sharp oil-price decline. In addition, while regional overcapacity remains a threat, Maybank-KE believes that the market has not given enough credit to SIA for its proactive capacity cutbacks. SIA is currently trading at 0.9x FY14e P/B. Maybank-KE maintains Buy on SIA with TP of $9.71