Singapore Airline's May traffic data showed nine consecutive months of decline in cargo, with a 3.2 per cent dip, though the pace of decline narrowed in the last month.
SIA's May data stands in contrast to the 15.9 per cent year-on-year decline in non-oil domestic exports and a 31.4 per cent fall in electronics exports over the same period. Given the steep fall in electronics exports, we believe that air cargo yields would also have been soft.The stronger traffic could have been due to an additional day off for Vesak Day this year compared to 2018, and to a smaller extent, due to SIA taking on some of Silk Air's shorter haul routes that were previously served by the grounded Boeing 737 Max aircraft.We maintain our"hold" recommendation, but we lower our fair value target price to $9.50.
We continue to value SIA on a sum-of-the-parts basis, with the airline operations valued at 0.75 time book value and SIA Engineering valued at $2.55.Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.
The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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