Wednesday, June 20, 2012

SIA / Scoot

SIA / Scoot: DMG says demand for Scoot's Singapore-Sydney daily route has been encouraging, with the load factor hitting 80%; adds as the low-cost carrier kicked off with only 4 aircraft this year, it doesn't expect cannibalization of SIA's traffic. Notes SIA has not reduced fares on its Sydney route despite the entry of Scoot, which suggests that demand for premium travel remains fairly encouraging. DMG expects Scoot to capture its own market share, rather than taking SIA's. Adds SIA's May passenger numbers were slightly above expectations, while the cargo segment was slightly short. Sees the numbers picking up for both the passenger and cargo segments moving forward as confidence in the recovery of the global economies grows, buoyed by monetary easing by the central banks across the world. Nonetheless, the outlook continues to be challenging among the full service carriers as competition continues to heat up. It keeps SIA at Buy with a S$12.13 target. The stock is +0.8% at S$10.25.

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