OCBC Investment Research analyst Chu Peng has kept “hold” on Singapore Airlines (SIA) with a higher fair value estimate of $4.90 from $4.75 previously.
See: UOB upgrades SIA to 'hold' with higher TP of $4.85
The higher figure stood after adjustments made following the airlines’ 1QFY2022 results with a slight environmental, social and governance (ESG) premium.
In her Aug 2 report, Chu says the airline scores better than its global peers in terms of social issues due to its “robust compensation practices, higher customer satisfaction and on-time performance metrics”.
SIA’s government and environment scores rank below the industry average, however, as “minority shareholders of SIA may face risks of their interests being subsumed by the Singapore government”, with the airline being a state-owned firm.
“While SIA operates a relatively young fleet, and has reduced its carbon emission intensity by an average of 12% per year, its emission intensity still exceeds the industry average,” she writes. “However, SIA appears to have stepped up its environmental efforts to achieve net zero carbon emissions by 2050, with continued investment in new generation aircraft, adoption of low-carbon technology such as sustainable aviation fuels and carbon offsetting.”
For the 1QFY2022 ended June, SIA posted 52.2% y-o-y higher revenue of $1.3 billion with narrower losses of $409 million from the $1.1 billion posted in the 1QFY2021, meeting Chu’s expectations.
To this end, Chu sees a gradual recovery ahead for the airline amid a quicker pace in vaccination rates.
Singapore has also announced that it aims to open its borders for travel by the end of 2021.
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That said, she believes that SIA is likely to remain in the red for the FY2022 as travel arrangements have to be bilateral and takes time.
“The recovery trajectory will depend on government regulations, the risk profile of individual regulatory authorities and vaccination rates,” she writes.
As at 3.39pm, shares in SIA are trading 4 cents higher or 0.8% up at $5.05, or 1.2 times FY2022 P/B, according to OCBC’s estimates.
Photo: Bloomberg
