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Singapore Airlines: Weak October operating results

Singapore Airlines’ (SIA) Oct 16 operating results saw passenger capacity (available seat kilometres or ASK) growth outpace passenger traffic (revenue passenger kilometres or RPK) growth across all its passenger airlines. As a result, overall passenger load factor (PLF) for Oct 16 fell 2.1ppt YoY to 76.7%. Parent airline’s PLF fell 1.6ppt to 77.4% as capacity reduction could not match up to the pace of fall in demand. On a separate note, SIA also recently announced further expansion of its partnership with Lufthansa Group by adding new codeshare destinations, in a bid to improve connectivity across both airlines and compete against the aggressive Gulf and Chinese carriers. That said, we believe this JV may help mitigate but is unlikely to overcome the challenges SIA is currently facing. We expect the weak yields environment to persist on overcapacity and aggressive expansion by the Chinese carriers amidst tepid economic growth conditions.

Keeping our forecasts unchanged, we maintain our HOLD rating with an unchanged S$10.

Singapore Post: Taking stock post 2QFY17 results

Singapore Post’s share price has dropped by about 12% since the release of its 2QFY17 earnings, underperforming the STI by a significant margin; the latter posted a flattish performance over the same period. We attribute this to 1) 2QFY17 earnings that were lower than the street’s estimates, as well as the 2) revision in dividend policy. As mentioned in our earlier reports, as SingPost builds up its eCommerce logistics capabilities, investments will be required, driving up expenses in the near term. Time will also be required for productivity gains as SingPost builds up scale. Margins in the logistics space are lower than mail, and competition in eCommerce logistics has also been increasing. At current levels, the stock is trading with a ~2.7% forecasted dividend yield.

Maintain HOLD with S$1.47 fair value estimate22 FV.


CEI Limited ADD, TP S$1.04, S$0.84 close
CEI Limited’s minimal capex and strong dividend track record could see investors being rewarded with 10-11% dividend yields over the next three years. Based on its 10- year historical average P/E of 9.2x, our TP is S$1.04.

LionelLim8.16Check out our compilation of Target Prices

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