May 19, 2017

Singapore Airlines’ (SIA) 4QFY17 swung to a core net loss of at S$6.4m, vs. core PATMI of S$127.3m a year ago, as it recorded a one-off provision of S$131.9m in relation to competition related fines. 4QFY17 revenue was flat YoY at S$3.72b despite traffic growth (+5.5%), as yields remained under intense pressure.

Operating expenses grew 3.5% YoY to S$3.69b due to higher average fuel prices as well as the double-digit capacity expansion by Budget Aviation Holdings (i.e. Tigerair and Scoot) and SilkAir.

For FY17, revenue fell 2.4% to S$14.9m with weaker performances at passenger airlines and cargo airline on the back of yield erosion, absence of income from aircraft delivery slot changes, mitigated by a one-time credit upon change in timing of revenue recognition of utilized tickets.

Consequently, with a 2.1% reduction in operating expenses on cheaper fuel costs, FY17 core PATMI was below expectations as it declined 16.0% to S$372.1m, forming 80.8% of our FY17 forecast.

SIA is recommending a final dividend of S$0.11 (FY16:S$0.35), bringing the total dividend payment for FY17 to S$0.20 (FY16: S$0.45). Pending analyst briefing, maintain HOLD, but our S$10.36 FV is under review. –OCBC


SIA closed at: S$9.980