Are SIA shares worth buying now?

• Singapore Airlines (SGX: C6L) shares rallied to S$5.10 on Tuesday (17 August 2021)
• The group saw its passenger load factor rise slightly in July 2021, it said on Monday
• UOB and OCBC analysts lifted their target prices on SIA two weeks ago
• Interested in trading SIA shares? Open an account with us to get started.

SIA Group records operating growth in July 2021

Singapore Airlines shares opened slightly higher a day after it reported its operating results for July 2021.

Overall group airline passenger capacity rose 14.4% to 5,119 seat-kilometres (km) in July, up from 4,476 seat-km in June.

This came on the back of a calibrated increase in passenger capacity (available seat-km), which rose to around 32% of pre-Covid-19 levels during the month.

Total passengers carried also grew by 14% month-on-month, with passenger load factor coming in at 16.3%, narrowly higher than the previous month, but 5.3 percentage points lower than a year before.

At the end of July 2021, SIA Group’s passenger network covered 67 destinations including Singapore. The Singapore Airlines full-service network covered 531 destinations, while low-cost subsidiary Scoot served 251 destinations.

Meanwhile, SIA Cargo registered a monthly cargo load factor (CLF) of 87.2%, up 2.6 percentage points year-on-year as cargo loads rose by 57.9% on the back of a 53.1% capacity expansion.

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SIA shares are up some 9% in the last three months, and nearly 19% year to date.

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What are analysts’ latest outlook on SIA?

The blue-chip currently has a consensus rating of ‘underperform’ and target price of S$4.56, based on the latest SGX StockFacts analyst data.

The target price represents a potential 9.5% downside from SIA’s last traded price of S$5.04 as at 15:05 SGT on Tuesday (17 August).

Two weeks ago, UOB analysts lifted their call on SIA to a ‘hold’ and target price to S$4.85, after the group reduced its net loss by 64% year-on-year to S$409 million for the June-ending quarter.

The analysts believe that while SIA will continue to face the challenge of having sufficient capacity to cater to both passenger and cargo demand, sentiment towards the aviation industry is still likely to improve further down the road.

As such, they raised their fair value price-to-book valuation multiple to 1.15 times from 1.0 times.

Meanwhile, OCBC analysts reiterated a ‘hold’ recommendation on a higher target price of S$4.90 (against S$4.75 previously), after they applied a ‘slight environmental, social and governance (ESG) premium’ and adjustments on the stock’s valuation.

And although SIA’s June-quarter results met their expectations, the analysts posit that SIA is likely to remain loss-making in FY2022 as ‘any travel arrangements have to be bilateral and takes time’.