You are here
Broker's take: OCBC upgrades SIA to 'buy' on potential for good upside
OCBC Investment Research has upgraded Singapore Airlines (SIA) to "buy", citing potential for good upside even as its share price has dropped sharply from its end-May peak of S$11.80 and is trading near its 52-week low.
Analyst Low Pei Han lowered her fair valuation of SIA to S$10.71 from S$11.01 in her report on Wednesday.
SIA shares were trading at S$9.33 at 11.10am, up 18 Singapore cents or 2 per cent. Previous share price lows included S$9.05 in the 2008 crisis and S$8.25 in the 2002-2003 Sars crisis.
Although fuel prices are expected to rise, SIA has hedged about 45 per cent of its fuel needs for FY2019, Ms Low noted. Its combined passenger loads from SIA, Silkair and Scoot are also higher this year than in previous years.
Ms Low said the group's upcoming Q2 FY2019 results should recognise losses from Virgin Australia including one-off items such as impairments, but the stock should see good upside if passenger and cargo yields turn out better than expected.
She added: "Though consensus is estimating a dividend yield of about 4.2 per cent, we note that this is likely based on last year's dividend of S$0.40 per share, which may or may not be sustained given there is historically less consistency in the group’s dividends compared to other Singapore-listed blue chips."
SIA's Q2 results are expected to be announced by Nov 7.