BUY; S$14.35; Price Target: 12-Month S$ 17.00
SIA June Operating Stats showed significant MoM improvement in Load Factor
June operating statistics showed a significant improvement in passenger load factors MoM.
Passenger carriage at SIA in June declined marginally by 0.4% yoy to 7,173.1m p-km, whilst load factor fell 4ppt to 78.8% on 4.7% yoy capacity increase. This load factor compared well with April and May PLFs of 74.6% and 73.6% respectively on capacity adjustments. (Capacity growth was 11.2% in April and 6% in May)
SilkAir monthly operating numbers were also reported for the first time and carriage grew by 10.3% yoy in June to 357.2m p-km on 6.9% capacity growth, resulting in a 2.4ppt improvement in load factor to 79.1%.
Cargo carriage grew by 0.7% yoy to 590.4m tonne-km on a modest 0.5% increase in capacity, with load factor showing a 0.1ppt improvement to 64%.
For the first three months of SIA's FYE Mar 2012 (Apr-Jun), passenger carriage rose by 3.5% yoy, on 7.2% capacity increase, resulting in a 2.7ppt decline in passenger load factor to 75.6%. This is below our full year assumption but we are expecting forward numbers. As shown in the improved June numbers, demand will gradually normalize in Japan (SIA has announced increased frequencies to Japan, amongst others) and fuel surcharges will kick in to help offset higher fuel costs. SIA will be releasing its 1Q12 results on 28 July and we are expecting it to be the weakest quarter for SIA in 2012 due to a) lower load factor from demand shocks and b) fuel surcharges not yet to fully kick in. Our 1Q12 net profit forecast for SIA is around S$150m.
Maintain BUY, TP S$17.00. Total final dividend of S$1.20 goes ex on 5th August and will be paid on 18 Aug.
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