Singapore Airlines (SIA) reported a 5.6% YoY rise in revenue to S$4.1b in 2QFY19 and net profit of S$56.4m, impacted by S$117.1m share of losses of associated companies. This was mainly due to the recognition of SIA’s share of loss from Virgin Australia, which we had highlighted in our earlier report on 17 Oct. 1HFY19 revenue and operating profit were 49% and 47% of our full year estimates, within expectations.

Bookings in the coming months are expected to be stronger YoY, but headwinds continue to persist in the form of cost pressures arising from elevated fuel prices and keen competition.

For 2HFY19, SIA has hedged 58% of its fuel requirements in MOPS at a weighted average price of US$71, against the current MOPS price of US$87.

The group has declared an interim dividend of S$0.08/share, compared to S$0.10/share a year ago. Our FY19 dividend forecast remains at S$0.30 compared to S$0.40 in FY18.

Pending an analyst briefing, we maintain our BUY rating given the stock’s low valuations but put our fair value estimate of S$10.71 under review.

Source: OCBC Research - 14 Nov 2018