Tuesday, August 18, 2015


SIA’s Jul’15 operating statistics were mixed as passenger traffic improved across the board, while cargo traffic fell.

On a group wide basis, passenger carriage improved 6.6% y/y against a 0.1% marginal increase in capacity. Consequently, passenger load factor (PLF) improved 2.8 ppt to 84.1%, its best ever July figure.

Carrier review:
SIA - The parent carrier’s PLF grew 2.9 ppt to 84.6% as passenger carriage improved 4% against a 1.5% decline in capacity. PLF gains were broad based, led by South West Pacific (+6.8ppt to 91%), and West Asia and Africa (+4.3ppt to 74.5%).

SilkAir - The regional carrier’s passenger carriage grew 16.5% over and above a 10.6% increase in capacity, as new routes were added to Bali and Cairns in Dec ’14 and May ’15 respectively. As a result, PLF lifted 3.8ppt to 74.3%.

Scoot - The budget carrier saw passenger carriage surging 12.7% compared to an 11.8% increase in capacity as it launched services to Osaka and Kaohsiung. This brought the total number of Scoot destinations to 15 in seven countries. PLF edged up 0.7ppt to 84.8%.

Tigerair - PLF improved by 2.7ppt to 85.3% as passenger carriage saw 3.3% growth amidst a 0.1% increase in capacity.

SIA Cargo - PLF tumbled 4.1ppt to 58.4% as cargo traffic declined 5% against capacity growth of 1.6%. PLFs declined across the board with South West Pacific (56.4%, +1.6ppt) the sole improvement amidst losses in West Asia and Africa (63.8%, -9.7ppt), Americas (59.8%, -7.6ppt), and Europe (69.3%, -6.3ppt) as demand could not keep pace with capacity additions.

Despite the improvement in passenger PLFs, management maintains that the operating environment continues to be challenging and that the growth in PLFs was largely due to promotional activities.

This could eventually come back to bite the group as yields are likely to remain compressed ever since the industry ceased fuel surcharges at the beginning of the year. IATA is forecasting an average yield decline of 7.5% in 2015.

Following its recent selloff, SIA’s now trades at a 7% discount to 1QFY16 NAV. This compares to the 0.8x P/B valuation at the trough of the global financial crisis.

The street has 6 Buy, 9 Hold, and 3 Sell ratings on the counter and a consensus TP of $11.85.

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