SINGAPORE (Oct 17): OCBC Investment Research is upgrading Singapore Airlines to “buy” with $10.71 peak fair value as the stock is trading at depressed valuations with negative news likely priced in.
In a Wednesday report, analyst Low Pei Han says SIA is now trading at its 52-week low of $9.15. This is close to the 2008 crisis low of $9.05 and 11% higher than the 2002-2003 Sars crisis low of $8.25. The stock is trading at just 0.8 times consolidated forward book, close to its 2008 lows as well, adds Low.
Although Low shares market concerns about rising fuel prices, she notes that for FY19, about 45% of SIA’s fuel needs are hedged while SIA’s current share price is now even lower than previous instances when Brent was trading at much higher levels.
In addition, operating stats showed SIA’s planes to the US were also much fuller in Sep. Overall passenger load factors -- SIA, Silkair, Scoot combined -- were also generally higher this year compared to previous years.
However, the group should recognise its share of losses from Virgin Australia in the upcoming 2Q19 results which saw one-off items such as impairments.
“There is good upside should passenger and cargo yields turn out to be better than expected,” says Low.
As at 4.22pm, shares in SIA are up 20 cents at $9.35.
