How will SIA shares fare in 2023?

• Singapore Airlines Ltd (SGX: C6L) share price opened higher on Tuesday (22 February 2023)
• The group posted its 'highest ever' quarterly operating profit
• IG analyst Yeap Jun Rong said while the results were ‘promising’, much of it has already been priced into the group’s share price
• Keen to trade SIA shares? Start today with an IG account.

SIA stock price target: What’s the latest?

Singapore Airlines (SIA) shares moved higher following the release of its latest quarterly results.

The national airline has seen its stock value increase by 5.5% since the start of the year.

As of 22 February 2023, the stock has a consensus rating of ‘neutral’ and average price target of S$5.66, based on analyst sentiments published by SGX StockFacts. The price target equates to a slight downside potential from SIA’s last traded price of S$5.79 a share.

‘With SIA’s share price having surged more than 20% since its October (2022) bottom, much may already have been priced for the catch-up recovery in air travel demand, as seen from the air traffic statistics towards the end of last year,’ said IG analyst Yeap Jun Rong.

CIMB’s equity research team, who last kept a ‘hold’ call and price target of S$5.97 on SIA shares, also forecasted that the group’s passenger yield for the full year will come in at $S$0.115 per revenue passenger kilometre, down from S$0.1183 previously.

The analysts added that they were ‘concerned’ about SIA’s cargo business (predicting that yields will ‘likely fall’ in the third quarter), which could have a large impact on the group’s second half earnings for FY2022/2023.

How did SIA fare in Q3 of 2022/2023?

The group posted its ‘highest ever’ quarterly operating profit of S$755 million in the third quarter of FY2022/2023. This is an improvement of 11.4%, or S$77 million, from the S$678 million posted a quarter earlier.

SIA also logged ‘record’ passenger load factors for the whole group, on the back of ‘robust demand’ across its networks. Passenger load factors for the group improved 0.8 percentage points to 87.4%, with load factors for SIA hitting 87.3% and Scoot hitting 87.8%.

The group passenger capacity reached 80% of pre-Covid levels in December 2022, higher than the average of 51% for the Asia-Pacific region. SIA and Scoot carried 7.4 million passengers in the third quarter, up 17% from the second quarter.

As predicted by CIMB, the cargo segment’s outperformance ‘moderated’ against the previous quarter ‘due to softening demand, as well as an increase in bellyhold capacity as more passenger aircraft returned to service globally’.

Looking ahead, the group expects the demand for air travel ‘to be robust’ in the fourth quarter, supported by the recovery in East Asia as travel restrictions ease across China, Hong Kong, Japan, and Taiwan.

‘Forward sales remain strong across all markets for both leisure and business travel, as well as all cabin classes,’ the airline said in a press release.

IG’s Yeap said that while the latest results looked ‘promising’, the ‘challenge’ for the group will now be on keeping up with the growth momentum, with passenger load factor having ‘stabilised’ and cargo performance being subpar.

‘Therefore, how long the pent-up travel demand can sustain and whether we have already seen the bulk of its catch-up recovery, will be something on investors’ mind,’ Yeap added.

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