SIA down 3% amid layoffs, AEM jumps 11%, USD/SGD slides

Friday market wrap: Singapore Airlines announces 4,300 job cuts, AEM raises revenue forecast by 4%, USD/SGD down three pips as risk-on mood returns.

AEM soars 10.6% on higher revenue forecast

Shares of AEM Holdings (SGX: AWX) soared as much as 10.6% on Friday, a day after the group raised its revenue guidance for the full 2020 financial year.

The stock rose to an intraday high of S$3.66 at 11:35 SGT on Friday 11 September 2020.

AEM’s board of directors stated in an SGX filing on Thursday 10 September 2020 it is revising its FY2020 revenue guidance upwards to be between S$480 million to S$500 million, based on the sales orders visibility and the business outlook going forward.

The new guidance represents a roughly 4% increase from its previous estimates of between S$460 and S$480 million provided on 03 August 2020.

Meanwhile, capital expenditure is expected to remain unchanged at about S$4 million.

Following the guidance revision, Maybank analysts on Friday raised their AEM target price by 19% to S$5.05, up from S$4.04 previously. Rating remained unchanged at ‘buy’.

The stock currently has a mean 12-month target price of S$4.56, according to Refinitiv analyst ratings. ­­­­­This represents a potential stock upside of 24.6%.

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SIA share price down 3% amid layoff exercise

Singapore Airlines (SIA) Group (SGX: C6L) announced on Thursday that it would cut around 4,300 positions across its three airlines – flagship carrier SIA, regional arm SilkAir and low-cost wing Scoot.

SIA’s share price is down 3% this week. Shares are trading at S$3.53 as at 14:30 SGT on 11 September 2020.

The stock currently has an average 12-month target price of S$3.41 a share from 11 analysts polled by Bloomberg, as of 10 September 2020. This represents a downside of 3.4% from the last traded price.

Eight brokers have rated the stock a ‘hold’, while four gave ‘sell’ recommendations.

The potential number of staff impacted could be reduced to about 2,400 in Singapore and in overseas stations, after taking into account various cost-cutting measures implemented earlier, the group said.

These include a recruitment freeze (conducted in March 2020), natural attrition, open vacancies that were not filled, an early retirement scheme for ground staff and pilots, and a voluntary release scheme for cabin crew.

Collectively, these measures have allowed the group to eliminate some 1,900 positions thus far, the airline added.

USD to SGD slides as US stock futures gain

The USD/SGD is turning lower again, as risk-on sentiments appeared to return (evident by US stock futures’ uptick) on Friday 11 September 2020.

As at 15:15 SGT, the USD to SGD exchange rate stands at S$1.36652 – down nearly three pips from an intraday high of S$1.37022 recorded at 05:30 SGT.

S&P 500, Nasdaq 100 and Dow Jones futures are up 0.78%, 1.13% and 0.57% respectively on Friday morning.

DailyFX analyst Daniel Moss wrote that a ‘wait-and-see’ monetary policy approach by the European Central Bank a day earlier could also ‘hamper the potential upside’ of the US Dollar Index.

OCBC FX Strategist Terence Wu said he expects the FX Sentiment Index to ‘stay choppy within the Risk-On zone’ going forward.

‘Overall, risk appetite may be undergoing a stage of flux, especially equities still tussling around support levels,’ he wrote.

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