Singapore Airlines shares gain on USD bond debut

Singapore Airlines (SIA) is selling its maiden US dollar bond, which is likely to raise US$300 million or more. The news gave its shares a lift.

  • Singapore Airlines (SGX: C6L) share price moves up to S$4.31 a share
  • It launched its first US dollar bond on Wednesday (13 January)
  • The bond issuance proceeds will reportedly finance new plane purchases
  • A handful of analysts remain either neutral or pessimistic on SIA’s stock
  • Trade SIA shares with an IG account today

Will SIA shares recover further?

Shares of Singapore Airlines (SIA) picked up pace on Wednesday (13 January 2021), after it was reported that the flag carrier will soon issue its first US dollar bond - a departure from its previous fundraisings done in the local currency.

The blue-chip stock climbed 1.7% to trade at S$4.31 as of 13:22 SGT, with 3.2 million shares changing hands. It had dipped 1.4% to close at S$4.24 on Tuesday.

Five out of 11 analysts recommended ‘buy’ on SIA, three rated it ‘hold’ while three had ‘sell’ calls as of Tuesday, according to Bloomberg data. Their average 12-month target price was S$4.29.

Over the past week, Morningstar’s research team gave a ‘hold’ call with a S$3.76 target while Credit Suisse was ‘neutral’ with a S$3.10 target.

The airline group’s stock has been struggling to recover to its pre-Covid levels, as the pandemic battered the aviation sector. SIA’s share price plunged by more than half to finish 2020 at S$4.28, from S$9.05 at end-2019.

Why is SIA selling its maiden USD bond?

SIA’s bond was launched on Wednesday with a 5.5-year tenor. The deal size will be finalised after investors place their orders; it is expected to be a ‘benchmark’ transaction, which means it will likely raise at least US$300 million, Reuters reported.

Proceeds will finance SIA’s purchases of new aircraft and ‘aircraft-related payments’, Reuters added, citing a term sheet.

SIA held calls with potential investors in Asia and Europe on Monday (11 January) to suss out demand for the bond, which cannot be sold to investors in the United States.

Previously, the flag carrier’s debt deals have been done in Singapore dollars.

OCBC Bank analyst Ezien Hoo noted that SIA is aiming to diversify its funding sources, after the airline group had completed several fundraisings. ‘Coming out at this time is a smart strategy,’ Hoo added.

Over the past seven years, SIA has issued five bonds worth about US$2.77 billion, according to Dealogic.

Airlines across the globe have made a slew of debt issuances - worth more than US$17 billion in the past six months - to bolster cash levels and cushion themselves from the financial impact of the Covid-19 crisis, according to Reuters.

Measured expansion’ of passenger network

SIA expects its total passenger capacity to recover to about 25% of pre-Covid levels by the end of March 2021. The airline group, which includes SilkAir and Scott, will also likely be flying to around 45% of its pre-pandemic destinations by then, SIA said on Monday.

It foresees a ‘measured expansion’ of its passenger network, in line with Singapore’s progressive reopening and the gradual vaccination of the world population.

The Covid-19 vaccination exercise for SIA’s Singapore-based staff also started on Wednesday.

How to trade SIA with IG

Are you feeling bullish or bearish on Singapore Airlines’ stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Singapore Airlines Ltd> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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