SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<ul><li>Institutions were net sellers of Singapore stocks over the five trading sessions spanning Oct 11 to Oct 17, with S$144 million of net institutional outflow, partially reversing the preceding 10 sessions of S$251 million net inflow.</li><li>This has brought net institutional flow in the 2024 year to Oct 17, back to a net outflow of S$21 million.</li><li>Leading the net institutional outflow over the five sessions through to Oct 17 were United Overseas Bank, Singapore Telecommunications, Singapore Airlines, Capitaland Ascendas REIT, Keppel, Capitaland Integrated Commercial Trust, Genting Singapore, Seatrium, Mapletree Pan Asia Commercial Trust and Jardine Matheson Holdings.</li></ul>

Institutions were net sellers of Singapore stocks over the five trading sessions spanning Oct 11 to Oct 17, with S$144 million of net institutional outflow, partially reversing the preceding 10 sessions of S$251 million net inflow.This has brought net institutional flow in the 2024 year to Oct 17, back to a net outflow of S$21 million.Leading the net institutional outflow over the five sessions through to Oct 17 were United Overseas Bank, Singapore Telecommunications, Singapore Airlines, Capitaland Ascendas REIT, Keppel, Capitaland Integrated Commercial Trust, Genting Singapore, Seatrium, Mapletree Pan Asia Commercial Trust and Jardine Matheson Holdings.

CNMC, Travelite, Noel Gifts and LMS Compliance directors raise stakes

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

<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 publish a detailed update on the APAC airline sector, featuring ANA, Cathay Pacific, JAL, Korean Air, Qantas and Singapore Airlines, addressing cargo yield normalisation, and unit cost inflation.</li>
<li>We see 24% upside to consensus EBITDAR for JAL in FY24 to March 2024, and 24% downside risk at Singapore Airlines based on our detailed analysis and quarterly earnings bridges.</li>
<li>We expect earnings at most carriers to decline in calendar 2024 versus 2023 as the combination of cargo yield normalisation, fuel price pressure, and further capacity restoration prompt margin declines.</li>
</ul>


We publish a detailed update on the APAC airline sector, featuring ANA, Cathay Pacific, JAL, Korean Air, Qantas and Singapore Airlines, addressing cargo yield normalisation, and unit cost inflation.
We see 24% upside to consensus EBITDAR for JAL in FY24 to March 2024, and 24% downside risk at Singapore Airlines based on our detailed analysis and quarterly earnings bridges.
We expect earnings at most carriers to decline in calendar 2024 versus 2023 as the combination of cargo yield normalisation, fuel price pressure, and further capacity restoration prompt margin declines.


APAC Airline Sector – Cost Inflation Management Differentials Crucial as Cargo Yields Normalise

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

<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

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)

CNMC, Travelite, Noel Gifts and LMS Compliance directors raise stakes

Institutions were net sellers of Singapore stocks over the five trading sessions spanning Oct 11 to Oct 17, with S$144 million of net...

Singapore Exchange Ltd (SGX)

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

APAC Airline Sector – Cost Inflation Management Differentials Crucial as Cargo Yields Normalise

Deep dive on earnings prospects of the top tier ex-China APAC full service carriers illustrates marked differences in inflation management, and...

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

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

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