Why is the SIA share price in decline again?

What is the SIA share price update?

Singapore Airlines' (SIA) (SGX: C6L) share price is on the descend again, following a steady uptrend that lasted two weeks.

That rally, which saw stock value spike up nearly 20%, had taken share price to a one-month peak of S$3.82 on Thursday 13 August 2020.

However, this week, share price has fallen roughly 4%, and continues to edge lower as at press time.

As at 15:15 SGT on Wednesday 19 August 2020, SIA stocks are trading at S$3.65 each on the IG platform.

IG’s market data shows that ‘buys’ form 63% of all trades on the SIA counter today and 57% of trades across the week so far.

Why did shares fall 4% this week?

SIA’s share price has been on a downward slide since the group reported a massive drop in July 2020 passenger carriage on Monday 17 August 2020.

For the month of July 2020, group passenger capacity fell 94.3% year-on-year, as demand for air travel ‘continued to be severely curtailed’ with border controls and travel restrictions still in place around the world.

Overall passenger carriage was lower by 98.6%, resulting in a group passenger load factor (PLF) of 21.6%, a decline of 64.2 percentage points year-on-year.

The flagship airline’s (SIA) capacity was 93.1% lower compared to last year’s, with only a skeletal network in operation connecting Singapore to 25 metro cities. Passenger carriage declined 98.2%, resulting in a PLF of 22.5%.

Regional carrier SilkAir's passenger carriage decreased by 99.6% year-on-year against a 99.3% cut in capacity. SilkAir only operated flights to Chongqing, Kuala Lumpur and Medan in July 2020.

Finally, budget arm Scoot’s passenger carriage declined 99.6% year-on-year against a contraction in capacity of 97.1%, which led to a PLF of 12.6%.

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When will SIA’s share price recover?

In terms of ratings, 8 out of 12 analysts polled by Bloomberg have given the SIA stock a ‘hold’ call and a 12-month share price target of S$3.41.

This represents a downside of 6.3% from the most recent traded price.

JP Morgan analyst Karen Li reiterated an ‘underweight’ rating on the stock alongside a price target of S$3.10 in an update posted on 31 July 2020.

Citing the group’s soft recovery guidance, as well as a larger-than-expected quarterly loss in Q1 FY2021, JP Morgan has cut its forecasts for FY21~23E, expecting a larger loss this fiscal year and still a loss for FY22, as compared to a prior expectation for a small profit.

UOB’s K Ajith lowered his price target to S$3.64 from S$3.80. However, he raised his recommendation to a ‘hold’.

Ajith wrote that while he expects the airline’s net loss to increase to S$3.3 billion (up from his initial projection of S$1.6 billion), he is certain that ‘most of the known negatives’ are already ‘reflected in the stock price’.

His investment case has also assumed air traffic rebounding ‘sharply’ in the second half of FY2022 on the expectation of a vaccine roll-out.

Finally, Bloomberg Intelligence analysts predict that the group’s revenue could plunge 82% in Q2 versus 79% in Q1, as they ‘expect high cargo yields to partially retreat’ from Q1 levels.

How to trade Singapore Airlines with IG

Are you feeling bullish or bearish on the SIA stock? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <Singapore Airlines Ltd> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade