Singapore Airlines’ (SIA) 4QFY15 results saw revenue climb 6.9% YoY to $3.9b, leading to an operating profit of S$91.9m compared to an operating loss of S$60.3m a year ago. Lower fuel costs and improved passenger yield were offset by taxes, impairment losses on aircraft. Consequently, 4QFY15 PATMI grew 46.7% to S$39.6m. FY15 results came in below our expectations as fuel hedging continues to limit earnings as PATMI only formed 92.6% of our FY15 forecast.

Revenue grew 2.1% to S$15.6b but excluding Tigerair’s consolidation, SIA’s revenue declined 0.2% to S$15.2b. Passenger carriage and yields improved but cargo revenue declined due to capacity reduction. Lower fuel costs contributed to a net S$263m reduction in fuel expenses, as it recorded hedging loss of S$549m in FY15 compared to hedging gain of S$87m in FY14. Consequently, PATMI increased 2.5% to S$367.8m.

Pending management briefing later, we maintain our HOLD rating on SIA but put our FV of S$11.59 under review for now.

Source: OCBC Research - 15 May 2015