SIA kickstarts 2021 on the back foot
Singapore’s flagship carrier saw its share price drop as much as 1.6% on the first trading day of 2021.
- SIA’s (SGX: C6L) share price kickstarted the new year on the backfoot
- The decline came despite Singapore’s gross domestic product (GDP) beating earlier estimates
- Last week, share price fell slightly after two SIA flight personnel tested positive for Covid-19
- Analysts see further downsides for the stock in the coming months
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Singapore Airlines (SIA) share price fell as much as 1.6% on the first trading day of 2021, despite better-than-forecasted Q4 GDP figures released by the Ministry of Trade and Industry earlier in the day.
Shares hit an intraday low of S$4.23 each at 09:20 SGT on Monday (04 January 2021), before rising slightly to S$4.27 towards the end of the session.
SIA’s stock price was stable across the month of December 2020, falling just 2.3%, on the back of positive Covid-19 vaccine developments.
On an annual basis, the stock was able to finish 26.3% higher, after adjusting share price in accordance with a rights issue carried out in May 2020.
What happened to SIA in December 2020?
Last Thursday (31 December), SIA’s share price declined by 1.2%, after an airline pilot who had travelled to the UK tested positive for a new Covid-19 variant that is believed to be more contagious than the original strain.
Four days earlier, an SIA air steward had also tested positive for the coronavirus after returning from a work flight to the US.
In other news, Singapore’s national carrier also said in a Singapore Exchange filing on Monday (21 December) that the cumulative use of the gross proceeds of S$8.8 billion raised from its May 2020 rights issue stood at approximately S$7.1 billion for the period between 8 June 2020 and 13 December 2020.
This usage comprised: the one-time utilisation of S$2 billion for the repayment of the bridge loan from DBS Bank; S$1.8 billion for operating expenses during this period; S$1.3 billion for ticket refunds; S$1.8 billion for debt service; and S$0.2 billion for aircraft payments.
The airline further noted that for FY2020/2021, in addition to the funds raised during the rights issue, it has to-date raised a total of S$2.1 billion via loans secured on its aircraft and a short-term unsecured loan, S$850 million through a convertible bond issue and S$500 million via a private placement of new 10-year bonds.
As at the time of the circular (21 December 2020), it also has approximately S$2.1 billion of lines of credit available for drawing, and up to an additional S$6.2 billion of mandatory convertible bonds to be issued, if the crisis prolongs.
Where do analysts see the SIA share price next?
The stock has been rated a ‘buy’ by four analysts and ‘hold’ by four other analysts, according to a Wall Street Journal poll on 04 January.
It also has an average 12-month target price of S$4.20 a share, which represents a downside of roughly 1.9% from the last traded price.
DBS analysts, who downgraded the stock to ‘fully valued’ with a target price of S$3.60 on 14 December, said SIA’s share price ‘has run ahead of an expected gradual recovery in earnings’.
The analysts further noted that they expect international air travel to start recovering only from the second half of 2021, after the roll-out of mass vaccinations in the previous half.
They also predicted that SIA’s losses will narrow from S$4.5 billion in FY2021 to S$130 million in FY2022, ‘before turning around’ in FY2023 as demand steadily improves.
Meanwhile, CIMB analysts were much more bullish in their target price of S$4.91 and rating of ‘add’, stating that the ‘roll-out of Covid-19 vaccines may boost SIA’s cargo volumes, gradually restore passenger travel and deliver fuel mark-to-market gains’ to its profit and loss statement and balance sheet.
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