Broker's take: SIA to benefit from air traffic recovery, say analysts

ANALYSTS were optimistic on Singapore Airline's (SIA) recovery as global air traffic recovers on the back of more vaccine roll-outs.

OCBC upgraded its "buy" call on SIA, raising target price to S$4.80 from the previous S$3.70.

This comes after SIA released its third-quarter results for FY21, which analyst Chu Peng said was better than expected.

She noted that cargo continued to outperform passenger business due to strong cargo demand, airfreight capacity crunch and increased frequencies of cargo-only passenger aircraft deployment. As such, Ms Chu believes that SIA's air cargo segment will benefit from the recovery of global economy, e-commerce and shipment of vaccines in 2021.

Furthermore, she foresees that passenger capacity will improve gradually, especially with Singapore's progressive reopening and the roll-out of vaccines in 2021.

Meanwhile, CGS-CIMB maintained its "add" call with an unchanged target price of S$4.89.

Analyst Raymond Yap valued SIA's net gearing at 0.9 per cent at the end of FY22 on expectations that the airline would issue a further S$6.2 billion of mandatory convertible bonds (MCB).

He believes that the airline is en route to recovery as passenger traffic continue to improve with vaccination roll-outs, urgent efforts to contain costs, and plans to deploy 25 per cent of its pre-Covid-19 passenger airline capacity by April 2021.

However, the analyst also cautioned on risks of a longer-than-expected shutdown in global international travel as various countries maintain their travel bans and restrictions on inbound travellers to prevent imported cases of Covid-19.

SIA shares were trading S$0.18, or 4.3 per cent higher at S$4.35 as at 4.28pm.