SIA shares tumble after lower first-quarter earnings amid falling yields, rising fuel costs
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SIA had earlier reported that net profit for the three months to June 30 fell 38.4 per cent to $452 million, from $734 million a year earlier.
ST PHOTO: JOYCE FANG
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SINGAPORE – The shares of Singapore Airlines (SIA) hit turbulence on Aug 1, falling sharply after the company reported disappointing earnings and the stock went ex-dividend.
SIA shares fell 12.1 per cent or 84 cents to a morning low of $6.13, from its close of $6.97 previously, about five minutes after trading began.
Lower earnings aside, the share price fall was exacerbated by the stock going ex-dividend on Aug 1. SIA had declared 38 cents per share in full-year dividend in May when it posted fiscal 2023/2024 earnings. So factoring in the 38-cent dividend that was no longer payable, SIA shares had dropped 46 cents or 6.6 per cent.
The counter pared losses and closed down 73 cents or 10.5 per cent at $6.24, with 31.9 million shares changing hands.
Brokers said that with short-sellers out in force, a quick recovery may be difficult.
“Shortists are having a field day this morning after the poor results,” remarked one stockbroker.
On July 31, SIA reported that net profit for the three months to June 30 fell 38.4 per cent
Analysts say investors might hold back from buying the stock for now until there is more clarity in the earnings outlook. They point out that unlike the past two years, when the group posted strong profit growth, it is facing a market with significantly increased capacity and competition which is putting pressure on yields.
Mr Raymond Yap of CGS International cut his SIA target price to $5.88, citing falling passenger yields, rising operating costs and moderating cargo yields, as he downgraded the stock to “reduce”.
“Our new target price of $5.88 represents a 6 per cent total return downside after including our forecast for financial year 2025’s dividend per share (DPS) of 30 cents (interim DPS of 10 cents plus final DPS of 20 cents), based on a 56 per cent payout ratio against our core net profit forecast,” he said.
Citigroup, on the other hand, maintained its neutral rating on SIA, with a target price of $6.76. It said: “We believe investors could find SIA’s bull case a challenge in the near-term as unit passenger pricing declines against unit costs inflation. (The) Air India/Vistara proposed merger could provide mid-term upside where regulatory approvals are still ongoing.”
Maybank Securities in a note on Aug 1 said: “Looking ahead, demand for travel is expected to stay healthy in the upcoming months but passenger yields are likely to stay below the previous year’s levels as more capacity enters the market, particularly in the Asia-Pacific region.”
