SIA shares continue to fall despite raising S$2 billion

Amid worries that a highly anticipated travel bubble may not take off, Singapore Airlines’ shares tumbled even after it announced S$2 billion in deals.

  • Singapore Airlines Ltd (SGX: C6L) share price falls to S$4.96 per share
  • Its sale-and-leaseback transactions for 11 planes rake in S$2 billion in total
  • A rise in community cases threatens to burst the Singapore-Hong Kong travel bubble
  • Analysts on average targeted S$4.56 for the SIA stock
  • Buy and sell SIA shares with an IG account

SIA stock price maintains downward slide

Shares of Singapore Airlines (SIA) slumped further to S$4.96 as of 13:42 SGT on Monday, down 2% day-on-day. By value, it was one of the most actively traded counters on the Singapore bourse.

The stock has lost 6.4% since closing at S$5.30 last Tuesday (27 April 2021).

SIA’s morning announcement of raising additional liquidity from sale-and-leaseback deals was not enough to lift gloomy sentiment amid the increase in Covid-19 community cases in Singapore. The rising case count has reignited concerns that the Singapore-Hong Kong air travel bubble may possibly be suspended.

Pessimism lingered in SIA shares, as eight analysts recommended ‘sell’, three said to ‘hold’, and only one gave a ‘buy’ rating as of Monday. Bloomberg data showed that the research teams’ average 12-month target price stood at S$4.56 per share.

Aircraft deals bring in fresh liquidity

In a filing on Monday, the airline group said it completed sale-and-leaseback transactions for 11 aircraft, comprising seven Airbus A350-900s and four Boeing 787-10s.

The deals were arranged by four different parties, and raised approximately S$2 billion in total.

‘During this period of high uncertainty, as the airline industry continues to navigate the unprecedented challenges caused by the Covid-19 pandemic, the SIA group will continue to explore additional means to raise liquidity as necessary,’ the flag carrier noted.

SIA has access to over S$2.1 billion in committed credit lines. It also has the option to raise up to S$6.2 billion in additional mandatory convertible bonds before the annual general meeting in July 2021.

Will the Singapore-Hong Kong travel bubble burst?

The relaunch of the air travel bubble between Singapore and Hong Kong, which had stoked optimism in the upcoming recovery of both cities’ airlines, was announced last Monday (26 April 2021). The arrangement would start on 26 May 2021 if the Covid-19 situation in the two cities remains stable.

However, Singapore’s latest spike in community infections has prompted worries that the bubble could be deflated again, The Business Times (BT) reported. Back in November, it was put on hold at the last minute due to Hong Kong’s surge in cases.

Alton Aviation Consultancy (Singapore) director Joshua Ng told BT it could be premature to conclude the bubble was at risk, given the evolving situation.

A pre-condition of the quarantine-free arrangement is that the seven-day average must be five or fewer unlinked community cases in either Singapore or Hong Kong, Ng noted. Many recent community cases were linked to prior cases, and thus would be excluded from this unlinked case count.

On Sunday, Singapore confirmed 14 new community cases, with only one currently unlinked.

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