SIA

SIA: very poor 1QFYMar12 results, missed forecasts by a wide margin.
Net profit of $45m was down 82% yoy, and only 4% of consensus full year forecast. In fact, net profit would have been closer to zero, were it not for a $40m profit on asset sales.
The main driver of the yoy decline was the 48% rise in spot jet fuel prices, which was not fully compensated for by the rise in yields. Qoq, fuel costs were up by >$300m.

Passenger load factors fell (-3 ppts yoy), while cargo continues to suffer with yield decline of 8% yoy. The parent co and SIA Cargo turned in a loss, while SIA Engrg and SilkAir’s profit prevented the group from registering red numbers.

Mgt’s guidance suggests a weak outlook, corroborating with the drop-off in trade and global PMIs which are leading indicators for premium travel.
Post-results, we see large cuts in earnings forecasts and target prices from the Street.

HSBC downgrades to Underweight from neutral, cuts TP to $12.70 from $15. believes the share price drivers for SIA are negative.
Deutsche downgrades to Hold from buy, cuts TP to $13.20 from $16.90.
Morgan Stanley however, keeps Overweight rating and TP $16.80 (post div), says the special and final DPS of $1.20, which goes ex on 2 Aug, may provide near term support.