Singapore Airlines’ (SIA) revenue came in within expectations (-0.2%) at S$3.6b in 4QFY14. However, operating loss is 19% lower than expected at S$60.3m due to lower-than-estimated fuel costs (-2.3%). On a full-year basis, FY14 revenue increased 1.0% to S$15.2b. Expenditure rose in tandem by 0.8%, though we note that this was greatly helped by average jet fuel prices being 5.2% lower YoY. Consequently, FY14 operating profit increased 13.1% to S$259m. Exceptional items and lower contributions from associates, partially mitigated by the S$372m gain from the sale of Virgin Atlantic, dragged FY14 PATMI down 5.1% to S$359.5m. A final and special dividend of 11 S-cents and 25 S-cents respectively were proposed, which we expect to lend near-term support to the share price. We maintain HOLD but put our S$9.50 fair value estimate under review pending an analyst briefing.

Source: OCBC Research - 9 May 2014