SIA

SIA: UBS believes although the consolidation of Tigerair’s net losses through the recent rights issue by Tigerair will negatively impact SIA’s earnings performance in the short-term, SIA is strategically in a better position to defend its market share and have greater control over yield in the longer run. Meanwhile, Singapore’s market overcapacity should ease over time, as limited capacity injections by SIA, Tigerair and Jetstar Asia should help offset modest traffic growth. However, this is unlikely to be sufficient to buffer downward price pressure and SIA may suffer further passenger yield declines in FY15 before a more broad-based market consolidation and sustained traffic recovery support a market turnaround. Ultimately, SIA has to focus on addressing competition on the Australasia-Europe routes as well as regional and long-haul LCC routes. UBS maintains Neutral on SIA, with TP lowered from $10.50 to $10.30 based on anticipated traffic growth decline and to account for consolidation of Tigerair’s net losses.