Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

<ul>
<li>We expect Singapore Airlines to report a disappointing 4Q24 on 15 May, as earnings normalisation continues.</li>
<li>Inflationary pressure is a key theme at SIA, with it suffering one of the highest levels of inflation in the APAC region.</li>
<li>Our forecasts for FY25, which suggest further earnings normalisation, are c.20% below consensus at the operating level.</li>
</ul>


We expect Singapore Airlines to report a disappointing 4Q24 on 15 May, as earnings normalisation continues.
Inflationary pressure is a key theme at SIA, with it suffering one of the highest levels of inflation in the APAC region.
Our forecasts for FY25, which suggest further earnings normalisation, are c.20% below consensus at the operating level.


Singapore Airlines – 4Q Likely to Extend the Theme of Earnings Normalization as FY25 Comes into View

<ul>
<li>We cut our SIA operating profit by 9% to S$2.6bn in FY24 and by 17% to S$1.5bn in FY25 versus consensus of S$2.1bn.</li>
<li>SIA's cost control is under-examined and we publish a deep dive on a concerning level of inflation relative to key peers, which actually escalated in 3Q24.</li>
<li>Cargo broke even in peak season, and Scoot's margins present a conundrum as it may need to be further utilization to help SIA with cost management.</li>
</ul>


We cut our SIA operating profit by 9% to S$2.6bn in FY24 and by 17% to S$1.5bn in FY25 versus consensus of S$2.1bn.
SIA's cost control is under-examined and we publish a deep dive on a concerning level of inflation relative to key peers, which actually escalated in 3Q24.
Cargo broke even in peak season, and Scoot's margins present a conundrum as it may need to be further utilization to help SIA with cost management.


Singapore Airlines – Onset of Earnings Normalization to Heighten Focus on Efficiency

External broker reports(aggregated public sources), UOB Kay Hian

UOB Kay Hian

External broker reports(aggregated public sources)

Backed by the UOB Group, UOB Kay Hian is one of Asia’s largest brokerage firms. Headquartered in Singapore, we are supported by more than 80 branches worldwide including a growing network of offices across Southeast Asia, Greater China, the United Kingdom and North America. Our global footprint and strong international presence have enabled us to feel the pulse of key financial markets and deliver incisive intelligence across industry sectors and asset classes. Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>Recent outperformance of SIA's share price is likely driven by fund flows.</li><li>While we appreciate SIA’s outstandingness among regional peers and expect upbeat 1QFY24 results, we caution that SIA’s valuation is very lofty, with its FY24F P/B of 1.58x (2.8 standard deviation above historical mean) matching the historical peak just before the global financial crisis (GFC).</li><li>The second leg of uprun started on 1 Jun 23, coinciding with the sharp share price decline of the three major Chinese Airlines triggered by the China Southern Airlines’ (CSA) surprising announcement (on 31 May 23) of raising up to 25.6% of new shares, which has underlined major risks of more EPS-dilutive equity raisings by the three major Chinese airlines.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Recent outperformance of SIA's share price is likely driven by fund flows.While we appreciate SIA’s outstandingness among regional peers and expect upbeat 1QFY24 results, we caution that SIA’s valuation is very lofty, with its FY24F P/B of 1.58x (2.8 standard deviation above historical mean) matching the historical peak just before the global financial crisis (GFC).The second leg of uprun started on 1 Jun 23, coinciding with the sharp share price decline of the three major Chinese Airlines triggered by the China Southern Airlines’ (CSA) surprising announcement (on 31 May 23) of raising up to 25.6% of new shares, which has underlined major risks of more EPS-dilutive equity raisings by the three major Chinese airlines.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Singapore Airlines - Recognised For Outstandingness, But Valuation Very Stretched

Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

<ul>
<li>
<a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">Singapore Airlines (SIA SP)</a> (SIA) November operating statistics were good, passenger load factor rose by 1.9ppt YoY to 87.8%, and cargo load factor rose by a similar quantum  </li>
<li>Market observations suggest yields should remain at high levels and cost items such as fuel and USD-denominated items on a favorable downtrend </li>
<li>If this performance continues, SIA will beat consensus easily. We recommend BUY with a TP of SGD8.07 - pegged to 10x FY24 PE. (+26% UPSIDE)  </li>
</ul>



Singapore Airlines (SIA SP) (SIA) November operating statistics were good, passenger load factor rose by 1.9ppt YoY to 87.8%, and cargo load factor rose by a similar quantum  
Market observations suggest yields should remain at high levels and cost items such as fuel and USD-denominated items on a favorable downtrend 
If this performance continues, SIA will beat consensus easily. We recommend BUY with a TP of SGD8.07 - pegged to 10x FY24 PE. (+26% UPSIDE)  


Singapore Airlines (SIA SP | BUY | SGD: 8.07): Nov' 2023 Op Stats, More Reason to Be Bullish

<ul>
<li>Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. </li>
<li>SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.</li>
<li>The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.</li>
</ul>


Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. 
SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.
The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.


Singapore Airlines: Further Positive Surprises to Come in 2H24 - Bigger Test in FY25

Singapore

Singapore Airlines Limited provides air transportation, engineering, pilot training, air charter, and tour wholesaling services. The Company's airline operation covers Asia, Europe, the Americas, South West Pacific, and Africa.

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Singapore Airlines (SIA SP)

Singapore Airlines – 4Q Likely to Extend the Theme of Earnings Normalization as FY25 Comes into View

We highlight out expectation that 4Q24 will further emphasize SIA earnings are normalising down from peak levels and we highlight our FY25...

Neil Glynn

Singapore Airlines – Onset of Earnings Normalization to Heighten Focus on Efficiency

Deep dive on SIA cost control, which is lagging key APAC peers, and journey to "normalised" earnings as capacity restoration continues.

Neil Glynn

Singapore Airlines - Recognised For Outstandingness, But Valuation Very Stretched

While we appreciate SIA’s outstandingness among regional peers and expect upbeat 1QFY24 results, we caution that SIA’s valuation is very lofty

UOB Kay Hian