Asia Pacific Equity Research 15 July 2014
Overweight
Singapore Airlines
SIAL.SI, SIA SP Price: S$10.54
Pax and cargo traffic growth weaker than seasonality and Cathay's in June
Price Target: S$13.00
We expect the pricing environment to improve as industry demand-supply comes into balance from late 2014. SIA’s valuations look attractive to us at 0.9x P/B, close to its historical trough valuation. We think this is unwarranted as we expect SIA's earnings to recover. Net cash still amounts to 29% of market cap and SIA’s “liquidation value” is S$13.3/share. If SIA pays out one-third of this, the yield would be 10%. Alternatively, it could partially divest its stake in SIA Eng via a dividend in specie to help facilitate more third-party MRO work. Reducing its stake to 51% would imply a 12% yield. Stay OW. Pax traffic fell 1% y/y in June, weaker than seasonality: This was lower than its 3% growth in 2013 and 8% growth in 2012 but in line with 1% drop ytd. In comparison, Cathay’s traffic grew 8% y/y in June. On a m/m* basis (June vs May, 2014 to adjust for the shorter month in June), traffic rose 9%, weakerthan-normal seasonality. SIA’s June pax traffic has historically been 11% higher m/m* in the past 25 years. Load factors held steady y/y but rose 7ppts m/m to 82% in June. PLFs rose the most on SW Pacific routes to 80%, up 3ppts y/y. Loads also rose 2ppts y/y on West Asia & Africa routes to 78%. Loads were steady y/y on N & SE Asia routes at 77% and fell 1ppt/4ppts y/y on and European and American routes to 86% but still at a high level. In comparison, CX’s loads rose 1ppt y/y, 3ppts m/m to 86%. Mgmt said “the operating environment remains challenging. Capacity will be adjusted accordingly to better match market demand and promotional activities shall continue in markets that require additional support, which will likely put downward pressure on yields.” SilkAir’s pax traffic rose 2% y/y, 15% m/m* vs its 7% y/y growth in 2013 and 3% growth ytd. Pax load factor fell 1ppt y/y but rose 6ppts m/m to 73%. PLFs on N & SE Asia and Pacific routes was 72% (-1ppt y/y and +8ppts m/m) while PLF on W Asian routes was 76% (+2ppts y/y, +1ppt m/m). Cargo traffic fell 4% y/y but rose 2% m/m* in June vs its 5% drop in 2013 and 7% drop in 2012 and 4% decline ytd. In comparison, CX’s cargo traffic rose 16% y/y. On a m/m* basis, traffic rose 2%, weaker than normal seasonality. SIA’s June cargo traffic has historically been 4% higher m/m* in the past 25 years. CLF was steady y/y, m/m at 63%. In comparison, CX’s loads rose 3ppts y/y, 2ppts m/m to 65%. Recent news: Tata-SIA JV airline plans to start operations by year end. Singapore Airlines (Reuters: SIAL.SI, Bloomberg: SIA SP) S$ in mn, year-end Mar FY13A FY14A FY15E Revenue (S$ mn) 15,098 15,244 17,001 Net Profit (S$ mn) 379 360 697 EPS (S$) 0.32 0.31 0.59 DPS (S$) 0.23 0.46 0.48 Revenue growth (%) 1.6% 1.0% 11.5% EPS growth (%) 14.2% (5.5%) 94.3% ROCE 1.5% 1.6% 4.6% ROE 2.9% 2.7% 5.3% P/E (x) 32.6 34.5 17.7 P/BV (x) 0.9 0.9 0.9 EV/EBITDA (x) 4.6 4.6 3.3 Dividend Yield 2.2% 4.4% 4.5%
FY16E 18,415 1,050 0.89 0.71 8.3% 50.5% 6.7% 7.8% 11.8 0.9 2.9 6.8%
FY17E 19,688 1,289 1.10 0.88 6.9% 22.8% 7.7% 9.3% 9.6 0.9 2.6 8.3%
Singapore Airlines Corrine Png
AC
(65) 6882-1514
[email protected] Bloomberg JPMA PNG
J.P. Morgan Securities Singapore Private Limited Price Performance
10.4 S$ 10.0 9.6 9.2 Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
SIAL.SI share price (S$) FTSTI (rebased)
Abs Rel
YTD 1.2% -2.7%
1m 1.2% 1.3%
Company Data Shares O/S (mn) Market Cap (S$ mn) Market Cap ($ mn) Price (S$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (S$ mn) 3M - Avg daily val ($ mn) FTSTI Exchange Rate Price Target End Date
3m 0.9% -0.5%
12m 2.7% 1.0%
1,176 12,396 9,984 10.54 15 Jul 14 41.7% 1.23 13.01 10.5 3290.98 1.24 30-Jun-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 8 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com
Corrine Png (65) 6882-1514 [email protected]
Asia Pacific Equity Research 15 July 2014
Key catalysts for the stock price: Further liberalization of air services agreements drive growth, Scoot is both a defensive strategy and new growth driver longer term, capital management, unlocking of value from potential divestments, US$ weakness.
Upside risks to our view: Lower fuel prices, better-than-expected traffic and yield growth, stronger Singapore dollar.
FY14A 15,244 1.0% 1,835 12.0% 15% 359 0.31 -5.5% 0.46 11.26 2,098 275 (72) 2.4% 0.7 7.1% -29.6% 2.7% FY14A 1.4% -5.1% 121.2 1.26
FY15E 17,001 11.5% 2,542 15.0% 13% 697 0.59 94.3% 0.48 11.35 2,719 708 (97) 4.1% 0.7 7.0% -30.3% 5.3% FY15E 4.0% 5.7% 120.0 1.27
FY16E 18,415 8.3% 3,103 16.9% 13% 1,050 0.89 50.5% 0.71 11.68 3,167 195 (127) 5.7% 0.8 6.8% -26.3% 7.8% FY16E 5.0% 6.7% 120.0 1.27
FY17E 19,688 6.9% 3,509 17.8% 12% 1,289 1.10 22.8% 0.88 12.01 3,518 874 (161) 6.5% 0.8 6.6% -25.5% 9.3% FY17E 5.0% 6.6% 120.0 1.27
Source: Company data and J.P. Morgan estimates.
Sensitivity analysis (FY15E) Sensitivity to 1% chg in pax traffic growth 1% chg in cargo traffic growth 1% chg in jet fuel price 1% chg in SGD
Valuation and price target basis
Our Jun-15 price target of S$13 is based on 1.1x P/BV, in line with SIA's historical average valuation over the past 10 years. This is well supported by SIA’s “liquidation” value of cS$13.3/shr.
P/BV Trading Range Since Listing 2.50
Following the entry of low cost carriers in late Current P/BV: 0.92x 2003, SIA de-rated to a lower trading range around P/BV due to market fears of rising competition even though LCCs could potentially contest only 10% of SIA's network
SIA Price-Book (Rolling 12M Fwd)
2.30 2.10 1.90
Expectations of capital management
1.8x
1.70
1.6x
1.50 1.30
1.3x
1.3x
1.1x
1.10 US and UK economic slowdown Gulf war trough: 1.1x Asian crisis 0.70 trough: 1.0x trough: 0.7x 0.90 0.50
0.9x Sept 11 trough: 0.9x SARS trough: 0.9x
GFC trough: 0.7x
Jan-90 Jun-90 Nov-90 Apr-91 Sep-91 Feb-92 Jul-92 Dec-92 May-93 Oct-93 Mar-94 Aug-94 Jan-95 Jun-95 Nov-95 Apr-96 Sep-96 Feb-97 Jul-97 Dec-97 May-98 Oct-98 Mar-99 Aug-99 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14
Key financial metrics Revenues (S$ MM) Revenue growth (%) EBITDA (S$ MM) EBITDA margin (%) Tax rate (%) Net profit (S$ MM) EPS (S$) EPS growth (%) DPS (S$) BVPS (S$) Operating cash flow (S$ MM) Free cash flow (S$ MM) Interest cover (x) Net margin (%) Sales/assets (X) Debt/equity (%) Net debt/equity (%) ROE (%) Key model assumptions Passenger traffic growth Cargo traffic growth Jet fuel price (US$/bbl) SGD/USD
Downside risks to our view: Deterioration in the macro environment, rising fuel prices, worse-than-expected competition from low-cost carriers and Middle Eastern carriers, value-destroying M&A, and a weaker Singapore dollar.
P/BV
Average
+1 std dev
-1 std dev
Source: Bloomberg, Company data and J.P. Morgan estimates.
EBITDA FY15E +/-3% +/-1% -/+1% +/-1%
EPS FY15E +/-10% +/-2% -/+4% +/-5%
JPMe change in estimates and vs. Consensus EPS (S$) FY15E JPMe 0.59 Consensus 0.47 % chg +26%
FY16E 0.89 0.62 +44%
Source: Bloomberg, J.P. Morgan.
Source: J.P. Morgan estimates.
Comparative metrics
Singapore Airlines Cathay Pacific Sector average
CMP LC 10.54 14.38
Mkt Cap $MM 9,984 7,299
P/E (x) FY14E 17.7 14.8 25.9
FY15E 11.8 11.7 17.5
P/BV (x) FY14E 0.9 0.9 1.1
FY15E 0.9 0.8 1.0
ROE FY14E 5.3% 6.0% 3.2%
FY15E 7.8% 7.2% 5.1%
YTD Stock perf. 1.2% (12.3%) (2.1%)
Source: Bloomberg, J.P. Morgan estimates. Forecasts for non-covered (NC) stocks are based on consensus estimates to calculate sector average. Note: SIA valuations are for FY15E and FY16E given its March year end. Prices are as of 15 July, 2014.
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Asia Pacific Equity Research 15 July 2014
Corrine Png (65) 6882-1514 [email protected]
Table 1: Singapore Airlines: June & YTD 2014 Operating Statistics SINGAPORE AIRLINES (PASSENGER) Passenger capacity (ASKm) Passenger traffic (RPKm) Passengers carried ('000) Passenger load factor (%) - East Asia - Americas - Europe - South West Pacific - West Asia and Africa SILKAIR (PASSENGER)* Capacity (M seat-km) Passenger-km (M) Passengers carried ('000) Passenger load factor (%) - East Asia - West Asia SIA CARGO Capacity (M tonne-km) Freight tonne-km (M) Freight carried (M kg) Cargo load factor (%) - East Asia - Americas - Europe - South West Pacific - West Asia and Africa OVERALL (PASSENGER & CARGO) Capacity (M tonne-km) Load carried (M tonne-km) Overall load factor (%)
June-14
June-13
Y/Y Chg
M/M* Chg
YTD-2014
YTD-2013
Y/Y Chg
9,964 8,116 1,596 82% 77% 86% 86% 80% 78%
10,097 8,230 1,581 82% 77% 90% 86% 77% 76%
-1% -1% 1% 0.0ppt 0.3ppt -4.0ppt -0.5ppt 3.4ppt 2.3ppt
0% 9% 8% 6.6ppt 6.6ppt 3.9ppt 8.9ppt 6.3ppt 4.5ppt
59,619 46,098 9,112 77% 75% 81% 78% 79% 72%
59,270 46,401 9,070 78% 77% 83% 81% 79% 72%
1% -1% 0% -1.0ppt -2.0ppt -2.3ppt -3.2ppt -0.6ppt 0.2ppt
688 500 309 73% 72% 76%
668 489 313 73% 73% 74%
3% 2% -1% -0.5ppt -1.4ppt 2.2ppt
5% 15% 17% 6.3ppt 8.3ppt 0.7ppt
3,931 2,735 1,695 70% 70% 69%
3,783 2,646 1,663 70% 70% 68%
4% 3% 2% -0.4ppt -0.5ppt 1.1ppt
845 530 93 63% 50% 67% 78% 52% 72%
878 550 94 63% 52% 64% 79% 55% 64%
-4% -4% 0% 0.1ppt -1.5ppt 2.5ppt -1.3ppt -2.4ppt 8.4ppt
2% 2% 0% -0.2ppt -1.1ppt 1.1ppt -1.3ppt -1.8ppt 3.8ppt
4,939 3,085 550 62% 52% 64% 78% 54% 66%
5,086 3,208 551 63% 52% 65% 77% 57% 64%
-3% -4% 0% -0.6ppt 0.1ppt -0.2ppt 0.5ppt -2.9ppt 2.0ppt
1,889 1,328 70%
1,937 1,366 71%
-3% -3% -0.2ppt
1% 6% 2.9ppt
11,163 7,620 68%
11,299 7,816 69%
-1% -3% -0.9ppt
Source: Company reports. *M/M change refers to daily number in June, 2014 vs May, 2014 to adjust for the shorter month in June.
Table 2: Singapore Airlines vs. Cathay Pacific June 2014 and YTD Summary Operating Statistics SIA
Cathay Pacific
June-14
Y/Y Chg
M/M* Chg
YTD-14
Y/Y Chg
June-14
Y/Y Chg
M/M* Chg
YTD-14
8,116
-1%
9%
46,098
-1%
530
-4%
2%
3,085
-4%
1,328
-3%
6%
7,620
Y/Y Chg
9,507
8%
5%
54,713
8%
817
16%
6%
4,622
12%
-3%
1,721
12%
6%
9,820
10%
Traffic Passenger (RPKm) Cargo (FTKm) Overall (RTKm) Capacity Passenger (ASKm)
9,964
-1%
0%
59,619
1%
11,073
7%
2%
65,474
5%
Cargo (AFTKm)
845
-4%
2%
4,939
-3%
1,259
10%
3%
7,318
11%
Overall (ATKm)
1,889
-3%
1%
11,163
-1%
2,312
9%
2%
13,545
8%
Passenger (%)
81%
0.0ppt
6.6ppt
77%
-1.0ppt
86%
1.0ppt
2.8ppt
84%
2.3ppt
Cargo (%)
63%
0.1ppt
-0.2ppt
62%
-0.6ppt
65%
3.2ppt
1.9ppt
63%
0.7ppt
Overall (%)
70%
-0.2ppt
2.9ppt
68%
-0.9ppt
74%
2.0ppt
2.3ppt
73%
1.2ppt
Load factor
Source: Company reports. *M/M change refers to daily number in June, 2014 vs May, 2014 to adjust for the shorter month in June.
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Asia Pacific Equity Research 15 July 2014
Corrine Png (65) 6882-1514 [email protected]
Figure 1: Singapore Airlines: P/BV Trading Range Since 1990 2.50
Following the entry of low cost carriers in late 2003, SIA de-rated to a lower trading range around P/BV due to market fears of rising competition even though LCCs could potentially contest only 10% of SIA's network
SIA Price-Book (Rolling 12M Fwd)
2.30 2.10 1.90
Expectations of capital management
1.8x
1.70
1.6x
1.50 1.30
1.3x
1.3x
1.1x
1.10 0.70 0.50
US and UK economic slowdown trough: 1.1x Gulf war Asian crisis trough: 1.0x trough: 0.7x
0.9x Sept 11 trough: 0.9x SARS trough: 0.9x
GFC trough: 0.7x
Jan-90 Jun-90 Nov-90 Apr-91 Sep-91 Feb-92 Jul-92 Dec-92 May-93 Oct-93 Mar-94 Aug-94 Jan-95 Jun-95 Nov-95 Apr-96 Sep-96 Feb-97 Jul-97 Dec-97 May-98 Oct-98 Mar-99 Aug-99 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14
0.90
Current P/BV: 0.92x
P/BV
Average
+1 std dev
-1 std dev
Source: Bloomberg, Company reports, J.P. Morgan estimates.
Figure 3: Cathay Pacific: P/BV Trading Range Since 1990
Cathay Pacific Price/Book (Rolling 12M Fwd)
2.80 2.39x
2.40
2.00x 1.61x
1.52x 1.21x
Average
+1 std dev
May-14
Jul-13
Sep-12
Nov-11
Jan-11
Mar-10
Sep-07
Nov-06
Jan-06
GFC trough: 0.6x
Mar-05
Sep-02
Jan-01
Mar-00
May-99
Jul-98
Sep-97
Jan-96
Nov-96
Mar-95
May-94
Jul-93
Sep-92
Nov-91
Jan-91
Mar-90
P/BV
Nov-01
Sep 11 trough: 0.6x
Asian crisis trough: 0.7x
0.40 0.00
0.90x
SARS trough: 0.9x
May-09
Gulf war trough: 1.7x
Jul-08
US and UK slowdown trough: 1.6x
1.20
May-04
1.60
Jul-03
2.00
0.80
Current P/BV: 0.84x
Acquisition of Dragonair and increased shareholding in Air China
-1 std dev
Source: Bloomberg, Company reports, J.P. Morgan estimates.
Investment Thesis, Valuation and Risks Singapore Airlines (Overweight; Price Target: S$13.00) Investment Thesis SIA’s valuation remains attractive, in our view, at 0.9x P/B, close to its historical trough valuation. We think this level is unwarranted as we expect the industry demandsupply growth to gradually improve, driving the sector and SIA’s earnings recovery. Net cash (after paying out the final + special DPS) still amounts to 29% of current 4
Corrine Png (65) 6882-1514 [email protected]
Asia Pacific Equity Research 15 July 2014
market cap and SIA’s “liquidation value” is S$13.3/share. If SIA paid out one-third of its current net cash balance, the yield would be 10%. Alternatively, we think it could partly divest its stake in SIA Eng via a dividend in specie to help facilitate SIA Eng’s acquisition of more third-party airline MRO work. Reducing its 78% stake in SIA Eng to 51% would imply a 12% yield. Stay OW – SIA is one of our top sector picks. Valuation Our Jun-15 price target of S$13 is based on 1.1x P/BV, in line with SIA's historical average valuation over the past 10 years. We think this is well supported by our estimate of SIA’s “liquidation” value of cS$13.3/shr. Risks to Rating and Price Target Key downside risks: Deterioration in the macro environment, rising fuel prices, worse-than-expected competition from low-cost carriers and Middle Eastern carriers, value-destroying M&A, and a weaker Singapore dollar.
5
Corrine Png (65) 6882-1514 [email protected]
Asia Pacific Equity Research 15 July 2014
Singapore Airlines: Summary of Financials Income Statement S$ in millions, year end Mar Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) % change Y/Y
Cash flow statement FY13 FY14 FY15E FY16E FY17E S$ in millions, year end Mar 15,098 15,244 17,001 18,415 19,688 EBIT 1.6% 1.0% 11.5% 8.3% 6.9% Depr. & amortization 1,818 1,835 2,542 3,103 3,509 Change in working capital (3.0%) 0.9% 38.5% 22.1% 13.1% Taxes 229 259 759 1,127 1,310 Cash flow from operations (19.8%) 13.1% 192.6% 48.5% 16.2% 1.5% 1.7% 4.5% 6.1% 6.7% Capex 20 25 26 24 22 Disposal/(purchase) 470 368 899 1,305 1,567 Net Interest 4.8% (21.7%) 144.3% 45.3% 20.0% Other (28) 57 (120) (174) (196) Free cash flow 6.0% 15.4% 13.3% 13.3% 12.5% 379 360 697 1,050 1,289 Equity raised/(repaid) 12.8% (5.1%) 94.0% 50.5% 22.8% Debt raised/(repaid) 1,172 1,176 1,175 1,175 1,175 Other 0.32 0.31 0.59 0.89 1.10 Dividends paid 14.2% (5.5%) 94.3% 50.5% 22.8% Beginning cash Ending cash DPS Ratio Analysis FY13 FY14 FY15E FY16E FY17E S$ in millions, year end Mar 5,060 4,884 5,005 4,569 4,562 EBITDA margin 1,737 1,762 1,965 2,129 2,276 Operating margin 275 243 271 294 314 Net margin 79 134 134 134 134 7,500 7,311 7,663 7,413 7,573 Sales per share growth 707 1,125 1,125 1,125 1,125 Sales growth 13,098 13,027 13,344 14,467 15,118 Net profit growth 22,428 22,643 23,323 24,213 25,049 EPS growth
Balance sheet S$ in millions, year end Mar Cash and cash equivalents Accounts receivable Inventories Others Current assets . LT investments Net fixed assets Total Assets . Liabilities Short-term loans 74 61 Payables 4,490 4,424 Others 838 907 Total current liabilities 5,402 5,391 . Long-term debt 945 904 Other liabilities 2,680 2,772 Total Liabilities 9,026 9,068 Shareholder's equity 13,402 13,575 BVPS (S$) 11.17 11.26 Source: Company reports and J.P. Morgan estimates.
6
61 4,934 907 5,901
61 5,345 907 6,312
904 904 2,772 2,772 9,578 9,988 13,745 14,224 11.35 11.68
Interest coverage (x) 61 5,714 Net debt to equity 907 Sales/assets 6,681 Assets/equity ROE 904 ROCE 2,772 10,358 14,692 12.01
FY13 229 1,589 16 1,854
FY14 259 1,576 178 2,098
FY15E 759 1,783 279 2,719
FY16E 1,127 1,976 224 3,167
FY17E 1,310 2,199 202 3,518
(1,875) 648 20 82 708
(2,575) 809 25 (57) 275
(2,300) 200 26 89 708
(3,300) 200 24 128 195
(3,050) 200 22 206 874
(68) (96) (188) 4,703 5,060 0.23
(53) (80) (318) 5,060 4,884 0.46
0 21 (609) 4,884 5,005 0.48
0 21 (652) 5,005 4,569 0.71
0 21 (904) 4,569 4,562 0.88
FY13 12.0% 1.5% 2.5%
FY14 12.0% 1.7% 2.4%
FY15E 15.0% 4.5% 4.1%
FY16E 16.9% 6.1% 5.7%
FY17E 17.8% 6.7% 6.5%
2.9% 1.6% 12.8% 14.2%
0.6% 1.0% (5.1%) (5.5%)
11.7% 11.5% 94.0% 94.3%
8.3% 8.3% 50.5% 50.5%
6.9% 6.9% 22.8% 22.8%
NM
NM
NM
NM
NM
(30.9%) (29.6%) (30.3%) (26.3%) (25.5%) 0.7 0.7 0.7 0.8 0.8 171.2% 171.2% 173.0% 175.7% 177.0% 2.9% 2.7% 5.3% 7.8% 9.3% 1.5% 1.6% 4.6% 6.7% 7.7%
Asia Pacific Equity Research 15 July 2014
Corrine Png (65) 6882-1514 [email protected]
JPM Q-Profile Singapore Airlines Ltd. (SINGAPORE / Industrials) As Of: 11-Jul-2014
[email protected]
Local Share Price
Current:
10.40
25.00
12 Mth Forward EPS
Current:
0.52
2.00 1.80
20.00
1.60 1.40
15.00
1.20 1.00
10.00
0.80 0.60
5.00
0.40 0.20
14%
12Mth fwd EY
Current:
Singapore BY
5%
Implied Value Of Growth*
Current:
Jan/14
Jun/13
Apr/12
Nov/12
Sep/11
Jul/10
Feb/11
Dec/09
Oct/08
May/09
Mar/08
Jan/07
Aug/07
Jun/06
Apr/05
Nov/05
Sep/04
Jul/03
Feb/04
Dec/02
Oct/01
May/02
Mar/01
Jan/00
Aug/00
0.00 Jun/99
Jan/14
Jun/13
Apr/12
Nov/12
Sep/11
Jul/10
Earnings Yield (& local bond Yield)
Feb/11
Dec/09
Oct/08
May/09
Mar/08
Jan/07
Aug/07
Jun/06
Apr/05
Nov/05
Sep/04
Jul/03
Feb/04
Dec/02
Oct/01
May/02
Mar/01
Jan/00
Aug/00
Jun/99
0.00
25.16%
0.80
Proxy
12%
0.60
10%
0.40
8%
0.20
6%
0.00
4%
-0.20
2%
-0.40
PE (1Yr Forward)
Current:
19.9x
35.0x
Jan/14
Jun/13
Nov/12
Apr/12
Sep/11
Feb/11
Jul/10
Dec/09
Oct/08
May/09
Mar/08
Jan/07
Aug/07
Jun/06
Apr/05
Price/Book Value
Current:
2.5x
30.0x
Nov/05
Sep/04
Feb/04
Jul/03
Dec/02
May/02
Oct/01
Mar/01
Aug/00
Jan/00
-0.60 Jun/99
Jan/14
Jun/13
Nov/12
Apr/12
Sep/11
Feb/11
Jul/10
Dec/09
May/09
Oct/08
Mar/08
Aug/07
Jan/07
Jun/06
Nov/05
Apr/05
Sep/04
Feb/04
Jul/03
Dec/02
May/02
Oct/01
Mar/01
Aug/00
Jan/00
Jun/99
0%
PBV hist
0.9x
PBV Forward
2.0x
25.0x 1.5x
20.0x 15.0x
1.0x
10.0x 0.5x
ROE (Trailing)
Current:
2.73
18.00
Dividend Yield (Trailing)
Current:
Jan/14
Jun/13
Nov/12
Apr/12
Sep/11
Feb/11
Jul/10
Dec/09
May/09
Oct/08
Mar/08
Aug/07
Jan/07
Jun/06
Nov/05
Apr/05
Sep/04
Feb/04
Jul/03
Dec/02
May/02
Oct/01
Mar/01
Aug/00
0.0x Jan/00
Jan/14
Jun/13
Nov/12
Apr/12
Sep/11
Feb/11
Jul/10
Dec/09
May/09
Oct/08
Mar/08
Aug/07
Jan/07
Jun/06
Nov/05
Apr/05
Sep/04
Feb/04
Jul/03
Dec/02
May/02
Oct/01
Mar/01
Aug/00
Jan/00
Jun/99
0.0x
Jun/99
5.0x
2.03
12.0
16.00
10.0
14.00 12.00
8.0
10.00 6.0
8.00 6.00
4.0
4.00 2.00
2.0
0.00 Jan/14
Jun/13
Nov/12
Apr/12
Sep/11
Feb/11
Jul/10
Dec/09
May/09
Oct/08
Mar/08
Aug/07
Jan/07
Jun/06
Nov/05
Apr/05
Sep/04
Feb/04
Jul/03
Dec/02
May/02
Oct/01
Mar/01
Aug/00
Jan/00
Jan/14
Jun/13
Nov/12
Apr/12
Sep/11
Feb/11
Jul/10
Dec/09
May/09
Oct/08
Mar/08
Aug/07
Jan/07
Jun/06
Apr/05
Nov/05
Sep/04
Jul/03
Feb/04
Dec/02
Oct/01
May/02
Mar/01
Jan/00
Aug/00
Jun/99
Jun/99
0.0
-2.00
Summary Singapore Airlines Ltd. SINGAPORE Industrials 12mth Forward PE P/BV (Trailing) Dividend Yield (Trailing) ROE (Trailing) Implied Value of Growth
9848.29 10.914638 SEDOL 6811734 Airlines Latest Min 8.52 19.94x 0.84 0.92x 0.75 2.03 -0.63 2.73 -0.37 25.2%
Max 30.12 2.16 11.23 15.91 0.63
Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs
Median 13.52 1.25 2.02 8.86 0.13
Average 15.15 1.32 2.70 8.30 0.14
2 S.D.+ 24.15 1.97 6.77 17.26 0.60
2 S.D. 6.16 0.67 -1.36 -0.67 -0.33
% to Min -57% -9% -63% -123% -246%
As Of: Local Price: EPS: % to Max % to Med 51% -32% 134% 36% 455% 0% 483% 224% 152% -47%
11-Jul-14 10.40 0.52 % to Avg -24% 43% 34% 204% -46%
* Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)
7
Asia Pacific Equity Research 15 July 2014
Corrine Png (65) 6882-1514 [email protected]
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.
Important Disclosures
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Singapore Airlines.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Singapore Airlines.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Singapore Airlines. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan– covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected]. Singapore Airlines (SIAL.SI, SIA SP) Price Chart
N S$17.5 32 OW S$17.5 N S$18.5 24 OW S$16.5 N S$16.5
N S$13.1N S$9.4
OW S$17
N S$15N S$10 OW S$14 OW S$16
OW S$14
OW S$20 OW S$19 OW S$15.5OW S$13
Price(S$) 16
8
0 Oct 06
Apr 08
Oct 09
Apr 11
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Oct 29, 2006.
Oct 12
Apr 14
Date
Rating Share Price Price Target (S$) (S$)
29-Oct-06
OW
15.62
16.50
09-Feb-07 OW
17.42
17.50
11-Feb-07 N
17.42
17.50
16-Apr-07
N
17.92
16.50
11-May-07 N
18.32
18.50
09-Jun-08
N
15.76
15.00
15-Jul-08
N
14.38
13.10
12-Dec-08 N
11.36
10.00
17-Feb-09 N
9.97
9.40
07-Jul-09
OW
12.68
14.00
11-Nov-09 OW
14.26
16.00
02-Feb-10 OW
13.66
17.00
10-Nov-10 OW
16.32
20.00
13-May-11 OW
14.58
19.00
04-Nov-11 OW
11.29
15.50
02-Feb-12 OW
11.00
14.00
16-Jul-12
10.63
13.00
OW
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear 8
Corrine Png (65) 6882-1514 [email protected]
Asia Pacific Equity Research 15 July 2014
in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com. Coverage Universe: Png, Corrine: Air China – H (0753.HK), AirAsia BHD (AIRA.KL), Cathay Pacific (0293.HK), Cebu Air, Inc. (CEB.PS), China Airlines (2610.TW), China Cosco Holdings, Ltd. - H (1919.HK), China Eastern Airlines - H (0670.HK), China Shipping Container Lines - H (2866.HK), China Southern Airlines - H (1055.HK), EVA Airways (2618.TW), Evergreen Marine Corp Taiwan Ltd (2603.TW), Hanjin Shipping Co Ltd (117930.KS), Korean Air (003490.KS), Neptune Orient Lines (NOL) (NEPS.SI), Orient Overseas Int'l Ltd (0316.HK), Pacific Basin Shipping (2343.HK), Precious Shipping (PSL.BK), SIA Engineering Company (SIAE.SI), ST Engineering (STEG.SI), Singapore Airlines (SIAL.SI), Tigerair (TAHL.SI), U-Ming Marine Transport Corporation (2606.TW), Wan Hai Lines (2615.TW), Yang Ming Marine (2609.TW) J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2014 J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients*
Overweight (buy) 45% 55% 46% 75%
Neutral (hold) 43% 49% 47% 66%
Underweight (sell) 11% 34% 7% 54%
*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
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Corrine Png (65) 6882-1514 [email protected]
Asia Pacific Equity Research 15 July 2014
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Corrine Png (65) 6882-1514 [email protected]
Asia Pacific Equity Research 15 July 2014
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