SIA

SIA: UOB Kay Hian upgrades to Buy from Sell with $13.50 TP. House note that the recent decline in Brent and Dubai crude has lowered jet fuel prices by about US$20/bbl from a peak of US$136 in 1Q13. House expect the trend to continue into the coming quarters. SIA trades at the lowest P/B among stocks in our coverage, anmd should be the first to be re-rated. Meanwhile, expect SIA to report a better 4QFY13, primarily due to lower unit costs. Overall, upgrade the stock to BUY and increase our target price by 26% to $13.50, valuing the stock at 0.9x FY14F book value ex SIAEC (previously 0.7x FY13 book value). New target price also reflects house upgrade of SIAEC’s target price from $5.20 to $5.60, with a holding co discount of 10%. SIA currently trades at the lowest P/B multiple among Asian carriers, which house believe is unjustified.