SIA shares downgraded to ‘sell’ by UOB, Nomura analysts

• Singapore Airlines Ltd (SGX: C6L) share price declines to S$5.08 per share
• Analysts on average believe the stock could fall another 15.7% in the next year
• UOB and Nomura recently gave ‘sell’ calls on the bellwether counter
• Bloomberg analysts expect the group to suffer further cash burn
• Buy and sell Singapore Airlines shares with an IG account

SIA shares decline on Monday and Tuesday

Singapore Airlines’ stock price slumped another 2.9% day-on-day to finish at S$5.08 on Tuesday (20 April 2021), extending losses from a day earlier.

Nonetheless, year-to-date, the Singapore flag carrier’s shares have recovered about 22%.

Research teams were largely bearish on SIA’s stock. Out of 11 analysts, seven had ‘sell’ calls, three said to ‘hold’, while one recommended ‘buy’.

On average, their 12-month target price stood at S$4.52, implying 15.7% potential downside based on Monday’s closing price.

What might weigh on SIA’s performance?

Last Wednesday, UOB downgraded SIA to ‘sell’ while trimming the target slightly to S$4.40.

Describing SIA shares as ‘anything but cheap’, UOB’s K Ajith pointed out that the stock price at the time was only about 7% away from pre-Covid levels in February 2020 and had ‘run ahead of foreseeable fundamentals’.

SIA had rallied amid optimism on rapid vaccination rates and the formation of travel bubbles. However, the economic reality is ‘not as rosy’ as airlines globally are still facing bankruptcy or are being bailed out, Ajith noted.

‘We are also now less optimistic of a traffic recovery by 3Q21,’ he said. UOB lowered its passenger traffic growth assumption by 34% for FY2022.

Bloomberg Intelligence (BI) analysts wrote that the slow recovery in international air traffic could result in SIA’s balance sheet coming under strain in a year or two. This means the airline group might need more funding soon.

Patchy rollouts of Covid-19 vaccination programmes worldwide may also prolong the carrier’s cash burn, BI added.

Meanwhile, Nomura last week downgraded SIA to ‘reduce’, from ‘buy’, with a S$5.06 target price.

SIA’s load factors up to February 2021 were ‘far lower’ than the research team expected, with the recovery in passenger numbers remaining slow.

Nomura’s forecasts imply a core loss of S$248 million for the fourth quarter of FY2021 and a core loss of S$321 million for FY2022. ‘We think losses will be cushioned by the resilient cargo earnings,’ it said.

SIA, Scoot to stop carrying Singapore-HK transit passengers

Last week, SIA and its budget unit Scoot announced they would stop carrying transit passengers on flights from Singapore to Hong Kong until further notice.

The move started on 17 April 2021 for SIA and would take effect on 30 April 2021 for Scoot.

It was due to new regulatory requirements in Hong Kong, and came after two Covid-19 cases were detected on a Scoot flight recently.

SIA and Scoot said that flights from Hong Kong to Singapore are not affected.

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