SIA share price: Is the stock overvalued?
Singapore Airlines (SIA) may be falling out of favour with research teams, even as it reported mild improvements in its operating results.
- Singapore Airlines (SGX: C6L) share price drops to S$5.48 on Tuesday (19 October)
- Total passenger traffic increased 4.4% in September
- CIMB analysts downgraded SIA’s stock, citing limited upside
- Keen to take advantage of SIA’s falling share price? Open an account with us to short the stock now.
Is a S$4.66 stock price target justified?
Shares of Singapore Airlines were trading slightly lower at S$5.48 as of 14:15 SGT on Tuesday.
Among 12 analysts covering SIA shares, only one suggested ‘buy’, seven recommended ‘hold’, while four gave ‘sell’ ratings, according to Bloomberg data.
Their average target price was S$4.66, which implied a potential downside of 15.4% based on Monday’s close of S$5.51.
JPMorgan last Wednesday upgraded its rating on SIA to ‘neutral’, alongside a S$5.20 target.
Bloomberg Intelligence (BI) estimated that the group’s revenue may recover by up to 26% of pre-pandemic levels given Singapore’s extended quarantine-free travel scheme for vaccinated arrivals.
The Republic’s vaccinated travel lanes (VTLs) provide a blueprint for border reopenings worldwide, with intra-Asia routes possibly offering greater traffic upside, BI added.
‘Australia, Japan, China and India could join by 1Q 2022 as their Delta variant outbreaks come under control, potentially restoring another 66% of Singapore Airlines' 2019 passenger capacity,’ BI wrote.
Uptick in demand thanks to VTLs
SIA said on Friday it expects group passenger capacity to reach 37% of pre-Covid levels by the third quarter of FY2021/2022.
In September, the group enjoyed an ‘uptick in demand’, especially to Germany, after Singapore launched its first VTL arrangements with Brunei and Germany.
The group’s total passenger traffic rose by 4.4%, compared to August. Passenger load factor improved by 1 percentage point month-on-month, led by Europe which saw demand pick up for Frankfurt and Munich VTL services.
However, for its cargo operations, September’s cargo load factor fell 1.6 percentage points year-on-year, as the group increased its loads by 54.1% and expanded capacity by 56.9%.
Airport stocks may outperform SIA: analysts
CIMB last Friday downgraded SIA from ‘add’ to ‘hold’, with a S$5.76 target price, citing the group’s rich valuations with limited upside of less than 10%.
The analysts noted that investor optimism at the nascent resumption of air travel has lifted the share prices of SIA and other regional airlines to levels they ‘no longer consider attractive’.
Among CIMB’s ‘hold’ calls in the Southeast Asian aviation sector, it prefers airport and engineering plays such as SATS over airlines like SIA, because the latter group are riskier and may face competitive yield pressures. Meanwhile, airport stocks offer ‘straightforward exposure to passenger volume recovery’.
Nonetheless, among regional airlines, the analysts prefer the Singapore carrier for its low exposure to spot oil prices and its ‘much stronger balance sheet’ compared to AirAsia Group Berhad.
They added that SIA’s substantial liquidity could help it navigate the medium term, during which business and premium travel may take longer than leisure and economy-class travel to recover to pre-pandemic levels.
However, the recovery of its transit business model may be slowed by complicated multi-jurisdictional regulations.
Feeling bearish or bullish about SIA?
Go long or short with CFDs on SIA and 16,000+ shares with our award-winning platform.* Perfect your technique with S$200,000 worth of virtual funds if you sign up for a free demo account today.
*Based on the Investment Trends 2018 Singapore CFD & FX Report based on a survey of over 4,500 traders and investors. Awarded the Best Online Trading Platform by Influential Brands in 2020. Awarded the best retail FX provider for Asia by FX Markets in 2020
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.