SINGAPORE (May 22): UOB Kay Hian is maintaining its “hold” call on Singapore Airlines (SIA), suggesting investors enter at $9.00 with a revised target price of $10.00, down from $10.10.
Analyst K Ajith found the 5% rise in the parent airline’s non-fuel cost and SIA’s inability to pass on at least part of the fuel cost increases troubling.
This means SIA’s aggressive price discounting to promote demand has not been able to enhance network connectivity and offset its non-profitable long haul routes.
In fact, Budget Aviation Holdings (BAH) fared better due to point-to-point traffic rather than improved network connectivity between Scoot and TigerAir.
SIA’s CEO Goh Choon Phong announced a transformational plan that would revamp the entire business but did not provide much details.
“Our sense is that SIA is still exploring options and does not have a concrete strategy to stem losses as yet,” says Ajith in a Monday report. “Details will be released within six months. SIA also indicated that it will still maintain its premium focus.”
Shares of SIA are currently trading at $9.70.
(See also: Singapore Airlines revamps business amid unyielding competition)
(See also: Singapore Airlines announces reintegration of SIA Cargo as group division)
(See also: Singapore Airlines swings to 4Q loss; dividends slashed)
