UOB Kay Hian

Thursday, 17 April 2025

Singapore Airlines (SIA SP): Navigating Turbulence, Expecting Future Gains

Investment Thesis: Hold Recommendation Maintained

• Share Price: S\$6.35
• Target Price: S\$6.22
• Upside: -2.1% (Previous TP S\$6.09)
• Recommendation: HOLD (Maintained)

UOB Kay Hian maintains a HOLD recommendation for Singapore Airlines (SIA SP), with a target price of S\$6.22, a slight decrease from the current share price of S\$6.35, indicating a potential downside of -2.1%. The previous target price was S\$6.09. The analysis suggests that while near-term earnings may face some challenges, future prospects, particularly those related to fuel prices, could provide a boost to the company’s financial performance.

Company Overview

Singapore Airlines, the flag carrier of Singapore, boasts a vast network that, prior to the pandemic, included over 130 destinations in more than 30 countries. The airline is frequently recognized as a leader in the industry, earning accolades from magazines and ranking agencies.

Stock Data

• GICS Sector: Industrials
• Bloomberg Ticker: SIA SP
• Shares Issued (m): 2,971.2
• Market Cap (S\$m): 18,867.3
• Market Cap (US\$m): 14,364.2
• 3-Mth Avg Daily Turnover (US\$m): 29.7
• 52-Week High/Low: S\$7.14/S\$5.86

Price Performance (%)

• 1 Month: (5.1)
• 3 Months: 1.3
• 6 Months: (0.9)
• 1 Year: 0.5
• Year-to-Date (YTD): -1.4

Major Shareholders (%)

• Temasek Holdings: 53.6

Key Financial Data

• FY25 NAV/Share (S\$): 5.28
• FY25 Net Debt/Share (S\$): 0.54

Analyst Insights: Roy Chen, CFA

• Contact: +65 6590 6627
• Email: roychen@uobkayhian.com

Earnings Outlook: 4QFY25 and FY26

The report anticipates softer year-on-year (yoy) earnings for 4QFY25 but expects FY26 to benefit from weaker fuel prices.

• March 2025 passenger load dropped 0.8% yoy, while cargo load increased 2.0% yoy.
• Net profit forecast for 4QFY25 is S\$400m, a 30% yoy decrease and a 24% quarter-on-quarter (qoq) decrease.
• The recent drop in jet fuel prices is expected to significantly support SIA’s FY26 financial performance, potentially lifting the FY26 earnings forecast by 17%.
• Cargo operations face uncertainties in the medium term, but 1QFY26 may see benefits from shipment frontloading from Asia (excluding China) ahead of anticipated US tariff changes.

Key Developments and Catalysts

• Mar 25 Operation Data: Released on 15 Apr 25.
• 4QFY25 Results Preview: Detailed analysis provided.
• Jet Fuel Prices: Sharp drop expected to boost FY26-27 earnings.

Operational Data Analysis: Mar 25 and 4QFY25

The following tables provide a detailed comparison of monthly and quarterly operational data for Singapore Airlines.

Pax Operation

Cargo Operation

Stock Impact Analysis

• Passenger Load:
  • Mar 25 pax load decreased by 0.8% yoy, reaching 104.9% of pre-pandemic levels. This decline is partly attributed to the shift in the Easter holiday.
  • Group pax load factor stood at 84.7%, a decrease of 3.0ppt yoy.
  • 4QFY25 pax capacity and pax load increased by 2.9% yoy and 2.8% yoy, respectively, with the pax load factor remaining relatively stable at 86.4%.
• Cargo Load:
  • Mar 25 cargo load increased by 2.0% yoy, achieving 85.4% of pre-pandemic levels.
  • Cargo capacity increased by 7.6% yoy, but the cargo load grew at a slower pace, influenced by strong volumes in East Asia and weaker demand in the Americas and Europe.
  • Cargo load factor decreased by 3.1ppt yoy in Mar 25.
  • 4QFY25 cargo load was nearly flat yoy, while capacity expanded by 7.2% yoy.

Key Financials

The following table summarizes key financial data and forecasts for Singapore Airlines.

Network and Future Outlook

• Network Update: Scoot suspended services to Berlin, reducing SIA Group’s passenger network to 128 destinations from 137 pre-pandemic.
• 4QFY25 Results Preview: Net profit expected to be around S\$400m, a 30% yoy drop from 4QFY24’s S\$575m and a 24% qoq fall from 3QFY25’s S\$528m. This estimate accounts for moderation in pax and cargo yields, a 5% yoy drop in average fuel cost, and largely flat non-fuel operating costs.
• Jet Fuel Impact: A recent 8% drop in jet fuel prices could lead to S\$500m savings in fuel costs for FY26, offsetting pressure on passenger and cargo yields.

Economic Factors and Growth

• GDP Growth: Singapore’s Ministry of Trade and Industry (MTI) cut the 2025 GDP growth forecast from 1-3% to 0-2%. Despite this, a major slowdown in air travel demand is not expected.
• Pax Load Growth: A 1.5% yoy growth in pax load is projected for FY26, driven by network recovery and capacity growth.

Cargo Market Dynamics

• Cargo Outlook: Uncertainties persist due to US tariffs, but a 90-day negotiation pause may allow manufacturers in Asia (excluding China) to expedite shipments to the US.
• 1QFY26 Cargo Performance: Potential benefit from shipment frontloading.

Earnings Revision and Risk Assessment

• Earnings Forecasts: FY26/FY27 earnings forecasts raised by 17%/6% respectively, reflecting cost savings from lower jet fuel prices. The FY25 earnings forecast remains at S\$2.77b.
• Key Risks:
  • Weaker macroeconomic environment
  • Potential higher US tariffs
  • Geopolitical tensions impacting fuel prices

Valuation and Recommendation

• Recommendation: Maintain HOLD with a slightly higher target price of S\$6.22, based on 1.16x FY26F P/B.
• Dividend Yield: Anticipation of a strong FY25 dividend yield, with potential for a 60-70% payout ratio, resulting in a dividend yield of 5.2% based on the current price.

Jet Fuel Prices Analysis

Analysis of jet fuel prices and their impact on Singapore Airlines’ financial performance.

Historical P/B Band

Examination of the historical Price-to-Book (P/B) ratio band to assess valuation.

Target Price Sensitivity

The following table illustrates target prices based on different P/B peg ratios.

Financial Tables

Comprehensive financial data including Profit & Loss, Balance Sheet, and Cash Flow statements.

Profit & Loss

Balance Sheet

Cash Flow

Key Metrics