SIA

SIA: Could become largest shareholder in Virgin Australia
-Virgin Australia (VAH) has proposed a A$852 mn one-for-one rights issue at A$0.21/sh as part of a capital structure review outcome. Singapore Airlines (SIA) has undertaken to take up its entitlement, and excess shares in VAH, up to a 25.9% cap.
- SIA, HNA, Virgin Group, Nanshan Group, and Air New Zealand have undertaken to take up their pro-rata entitlements. Assuming Etihad does not take up its share, SIA could be the largest shareholder in VAH at 25.9%.
- CS sees the possible emergence of SIA as the largest shareholder from the recent ownership changes for VAH as a positive outcome. It will also quell concerns that SIA could lose its influence on VAH. The HNA partnership will give VAH exposure to the booming Chinese aviation market, one that it has been missing out on compared to domestic rival Qantas.
- CS maintain OUTPERFORM on confidence SIA's portfolio strategy. SIA currently trades at 1.0x P/B, below that of its peers and historical average at 1.2x and 1.1x respectively.