Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Equity Bottom-Up

<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

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>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

<ul>
<li>Dearth of international flights from Chinese and Russian carriers -- 2nd &amp; 3rd biggest global aviation market, will distort supply, underpins strong yields and profitability.  </li>
<li>SIA's cost management is superior thanks to high asset utilisation, stable SGD vs. the USD, and access to attractive financing.  SIA's competitors severely lack these attributes. </li>
<li>We forecast FY24 net profit of SGD2.4b (+13.1% YoY) and peg it to 10x PE to derive a TP of SGD8.07, +30% UPSIDE potential.  </li>
</ul>


Dearth of international flights from Chinese and Russian carriers -- 2nd &amp; 3rd biggest global aviation market, will distort supply, underpins strong yields and profitability.  
SIA's cost management is superior thanks to high asset utilisation, stable SGD vs. the USD, and access to attractive financing.  SIA's competitors severely lack these attributes. 
We forecast FY24 net profit of SGD2.4b (+13.1% YoY) and peg it to 10x PE to derive a TP of SGD8.07, +30% UPSIDE potential.  


Singapore Airlines: Supply Dislocations Will Underpin Strong Profits for Much Longer

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>Temasek raised around US$300m via its secondary selldown in <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> in Jun 2023. The lockup from that placement will expire soon.</li>
<li>Temasek still owns over 50% of SIA and hence, any selldown might not come before SIA reports its 1H23/24 results in mid-Nov 2023.</li>
<li>In this note, we talk about the placement lockup dynamics.</li>
</ul>


Temasek raised around US$300m via its secondary selldown in Singapore Airlines (SIA SP) in Jun 2023. The lockup from that placement will expire soon.
Temasek still owns over 50% of SIA and hence, any selldown might not come before SIA reports its 1H23/24 results in mid-Nov 2023.
In this note, we talk about the placement lockup dynamics.


SIA Placement Lockup - Time for Another Trim of Its US$7bn Stake

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.

<ul><li>Wilmar chairman Kuok, QAF MD Lin Kejian continue to build interests OCBC led the share buyback consideration tally, buying back 2 million shares at an average price of S$12.67 per share, followed by Olam Group, which bought back 7 million shares at an average price of S$1.08 per share.</li><li>Between Sep 13 and Sep 15, QAF joint group managing director and executive director Lin Kejian acquired 945,600 shares at an average price of S$0.824 per share.</li></ul>

Wilmar chairman Kuok, QAF MD Lin Kejian continue to build interests OCBC led the share buyback consideration tally, buying back 2 million shares at an average price of S$12.67 per share, followed by Olam Group, which bought back 7 million shares at an average price of S$1.08 per share.Between Sep 13 and Sep 15, QAF joint group managing director and executive director Lin Kejian acquired 945,600 shares at an average price of S$0.824 per share.

Wilmar’s Chairman Kuok & QAF MD Lin Kejian Continue to Build Interests

Singapore

SATS Limited provides integrated ground handling and in-flight catering services at Singapore Changi Airport.  The Company also provides aviation security, airline laundry, and airport cargo delivery management services.

ComfortDelGro Corporation Limited provides bus, taxi, car leasing and rental, automotive engineering, maintenance services, and diesel sales.  The Group also provides investment trading and operates vehicle inspection and assessment services, and advertising services.

SIA Engineering Co Ltd provides airframe and component overhaul services, line maintenance and technical ground handling services. The Company also manufactures aircraft cabin equipment, refurbishes aircraft galleys, repairs and overhauls hydromechanical aircraft equipment.

Hutchison Port Holdings Trust is a port investor, developer and operator. The Company is also involved in transportation related services and logistics operations, including container storage and repair, container tracking, general and bulk cargo tranfer, warehousing, marine shuttle services and other related services.

Singapore Post Limited is the national postal service provider in Singapore. The Company provides domestic and international postal and courier services including end-to-end integrated mail solutions covering data printing, letter-shopping, delivery and mailroom management, and others. Singapore Post also offers end-to-end e-commerce logistics solutions.

SBS Transit Limited provides public bus services, advertisement on its bus fleet, and bus chartering.

Samudera Shipping Line Limited owns and operates ocean-going ships and provides containerized feeder shipping services. Through its subsidiaries, the Company also owns and charters vessels, provides sea and air freight forwarding, and operates shipping agency and container freight station services.

Keppel Corporation Limited's core businesses are offshore and marine, infrastructure, property investment and development, telecommunications and transportation, energy, and engineering.

ST Engineering is a global technology, defence and engineering group with offices across Asia, Europe, the Middle East and the U.S., serving customers in more than 100 countries. The Group uses technology and innovation to solve real-world problems and improve lives through its diverse portfolio of businesses across the aerospace, smart city, defence and public security segments. Headquartered in Singapore, ST Engineering reported revenue of $7.9b in FY2019 and it ranks among the largest companies listed on the Singapore Exchange. It is a component stock of the FTSE Straits Times Index, MSCI Singapore, iEdge SG ESG Transparency Index and iEdge SG ESG Leaders Index.

Jardine Matheson Holdings Limited is a multinational enterprise with a portfolio of businesses focused on the Asia-Pacific region. The Group's activities include financial services, supermarkets, consumer marketing, engineering and construction, automobile trading, insurance broking, property investment, and hotels.

China Southern Airlines Company Limited provides commercial airline services throughout China, Southeast Asia and other parts of the world.  The Company also provides other airline related services including aircraft maintenance and air catering.

China Eastern Airlines Corporation Limited, together with its subsidiaries, operates in the civil aviation industry. It offers passenger, cargo, mail delivery, ground, cargo handling, and other extended transportation services.

ANA Holdings Inc provides a variety of air transportation-related services. The Company offers scheduled & unscheduled air passenger services and air courier services. ANA sells aircraft parts and provides travel arrangement & reservation services as well.

Air China Limited provides passenger, cargo, and airline-related services in China.  The Company is primarily based in Beijing and a major hub for domestic and international air transportation.  Air China's airline-related services include aircraft maintenance, repair, overhaul service, ground services, and in-flight catering services.

United Airlines Holdings Inc is an airline holding company.  The Company owns and operates airlines that transports persons, property and mail throughout the United States and abroad.

Southwest Airlines Co. is a domestic airline that provides primarily short-haul, high-frequency, point-to-point service.  The Company offers flights throughout the United States.

International Consolidated Airlines Group S.A. provides transportation services. The Company offers international and domestic air passenger and cargo transportation services. International Consolidated Airlines Group serves customers worldwide.

International Consolidated Airlines Group (IAG LN)

International Consolidated Airlines Group

LATAM Airlines Group S.A. is an airline that provides both domestic and international flight services.  The Company provides passenger and cargo services to destinations in Chile, South America, the Caribbean, Europe, North America, and the Pacific.  LATAM Airlines operates passenger aircraft and cargo freighters.

InterGlobe Aviation Limited provides passenger airlines services. The Company offers ground management, air transportation, terminal maintenance, and other services. InterGlobe Aviation conducts its business globally.

Turk Hava Yollari Anonim Ortakligi (THY), also known as Turkish Airlines, provides passenger and cargo air transportation services. The Company serves all domestic destinations as well as the Middle East, North America, Europe, Asia, North Africa and South Africa.

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)