SIA closes lower after revealing it has spent S$7.1 billion since June

Singapore’s flagship carrier saw its share price plunge as much as 4.8% on Tuesday, a day after the group said it has burned through S$7.1 billion of cash in the last six months.

  • SIA’s share price dropped nearly 5% on Tuesday (22 December) to S$4.17
  • This came after the group said it has used up approximately S$7.1 billion of the S$8.8 billion it raised in an earlier rights issue
  • Last week, DBS analysts downgraded their rating on SIA, citing that the stock has ‘run ahead’ of an earnings recovery
  • Meanwhile, CIMB is more bullish, recommending an ‘add’ call

SIA share price: What’s the latest?

Singapore Airlines (SIA) share price fell as much as 4.8% on Tuesday (22 December 2020), a day after the group said it has spent approximately 80% of the funds raised from a rights issue in June 2020.

Shares hit an intraday low of S$4.17 each at 14:00 SGT, before rising slightly to finish the day at S$4.23.

SIA’s stocks are up nearly 25% since the start of November 2020, largely due to positive Covid-10 vaccine developments.

What did SIA say on Monday?

Singapore’s national carrier said in a Singapore Exchange filing on Monday (21 December) that the cumulative use of the gross proceeds of S$8.8 billion raised from an earlier rights issue is approximately S$7.1 billion for the period between 8 June 2020 and 13 December 2020.

This usage comprised of: the one-time utilisation of S$2 billion for the repayment of the bridge loan from DBS Bank; S$1.8 billion for operating expenses during this period; S$1.3 billion for ticket refunds; S$1.8 billion for debt service; and S$0.2 billion for aircraft payments.

‘While international air travel continues to be affected by the pandemic, the company will continue to be prudent and proactive in managing its liquidity,’ SIA said in the announcement.

The airline further noted that for FY2020/2021, in addition to the funds raised during the rights issue, it has to-date raised a total of S$2.1 billion via loans secured on its aircraft and a short-term unsecured loan, S$850 million through a convertible bond issue and S$500 million via a private placement of new 10-year bonds.

It also has approximately S$2.1 billion of lines of credit available for drawing, and up to an additional S$6.2 billion of mandatory convertible bonds to be issued, if the crisis prolongs.

Where next for the SIA stock?

The stock currently has an average 12-month target price of S$4.07 a share and rating of ‘neutral’, based on a Refinitiv poll.

DBS analysts, who downgraded the stock to ‘fully valued’ with a target price of S$3.60 on 14 December, said SIA’s share price ‘has run ahead of an expected gradual recovery in earnings’.

The analysts further noted that they expect international air travel to start recovering only from the second half of 2021, after the roll-out of mass vaccinations in the previous half.

They also predicted that SIA’s losses will narrow from S$4.5 billion in FY2021 to S$130 million in FY2022, ‘before turning around’ in FY2023 as demand steadily improves.

Meanwhile, CIMB analysts were much more bullish in their target price of S$4.91 and rating of ‘add’, stating that the ‘roll-out of Covid-19 vaccines may boost SIA’s cargo volumes, gradually restore passenger travel and deliver fuel mark-to-market gains’ to its profit and loss statement and balance sheet.

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