Hot stock: SIA soars 5.2% amid global airline stock rally
SHARES of national carrier Singapore Airlines (SIA) jumped more than 5 per cent on Monday amid a global airline stock rally.
On the Singapore bourse, SIA shares hit an intra-day high of S$5.30 before easing to finish at S$5.24, up S$0.26 or 5.2 per cent, with some 20.3 million shares changing hands.
One married deal took place before the market opened, with 132,500 shares transacted at S$4.981 each, ShareInvestor data showed.
K. Ajith, director of Asia transport research at UOB Kay Hian, told The Business Times (BT) on Monday that SIA's market cap is now higher than they were at pre-Covid levels.
"At the current price, SIA would be trading at almost 1.2 times the average of FY22 and FY23's book value, and this is after treating the mandatory convertible bonds as equity.
"As for what's driving the price, I believe it is the global phenomena of fund flow into the sector, which has underperformed substantially," he added.
UOB Kay Hian has a "hold" recommendation and a target price of S$4.47 on the counter.
DBS Group Research is maintaining its "fully valued" call with a target price of S$3.60 for SIA.
Riding on continued positive developments surrounding vaccines, aviation stocks have been buoyant in recent days, DBS analyst Paul Yong told BT on Monday, adding that news of Johnson & Johnson's single-dose vaccine probably helped sentiment as well.
He noted that with the "recent exuberance" in aviation stock prices, SIA is now trading at over 1.3 times its book value - a decade high for the company. DBS expects steady and gradual recovery for the sector from the second half of the year.
That said, Mr Yong added that share prices might be "running a little ahead of fundamentals".
"We need to be cognisant that SIA is a pure international carrier and globally, we'd expect domestic air travel to recover ahead of international travel," he noted.
The Bloomberg World Airlines Index soared 15 per cent last month, but is 17 per cent below its 2020 peak set in January before the coronavirus outbreak hit the world with full force.
Separately, in a filing to the Singapore Exchange on Monday, SIA announced that it has spent a further S$1.1 billion of the S$8.8 billion raised during a rights issue last year. With this, the flag carrier has now utilised S$8.2 billion of the proceeds of the rights issue.
Of the S$8.2 billion spent between June last year and February this year, S$2.2 billion was used for operating expenses, S$2 billion went towards repaying a bridging loan from DBS, and some S$1.8 billion was to service debt. The rest was used for ticket refunds as well as aircraft and aircraft-related payments.
Rights issue aside, the carrier has also increased its liquidity since FY20/21 by a further S$4.6 billion to help it ride out the pandemic, including S$2.1 billion from securing financing on its aircraft. It also has up to an additional S$6.2 billion in mandatory convertible bonds to be issued if the crisis is protracted.
Last month, the airline group reached agreements with planemakers Airbus and Boeing enabling it to push back the delivery of some new aircraft, allowing it to defer more than S$4 billion of capital expenditure slated for between FY20/21 and FY22/23 to later years.
SIA said: "While international air travel continues to be affected by the pandemic, the company will continue to be prudent and proactive in managing its liquidity."
