Hot stocks: SIA, SATS climb as vaccine hopes spur rally

TRAVEL and tourism-related stocks revved higher on Tuesday, as positive news from Moderna's Covid-19 vaccine trials boosted investor confidence. The firm is the second drugmaker after Pfizer to announce promising trial data.

C6L shares were trading at S$4.02 as at 1.35pm, jumping 3.9 per cent or S$0.15, with 15.8 million shares changing hands. Shares of ground handler S58 : S58 0% climbed 2.8 per cent or S$0.11 to hit an eight-month high of S$4.11 on six million shares traded; the last time the counter reached this level was on March 2.

DBS Group Research has raised its target price (TP) on SATS to S$4.50, up from S$4.02 previously. The revised TP represents a 13 per cent upside from the counter's close of S$3.99 on Monday.

In a research note on Tuesday, DBS analysts Alfie Yeo and Andy Sim cited SATS as a recovery play on vaccine development and deployment. "We assume international air travel to recover to pre-Covid-19 levels in 2022, and expect the stock to re-rate and normalise ahead of vaccine approval and deployment in 2021," they said.

The analysts added that vaccine newsflow has been positive, with Pfizer/BioNTech and Moderna reporting 90 per cent and 94.5 per cent efficacy respectively in their initial Phase Three trial observations recently.

Mr Yeo and Mr Sim anticipate at least one effective vaccine to be commercialised next year. As such, they have accelerated their recovery assumptions, with faster-than-expected mass travel and normalisation kicking in.

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The research team has raised SATS's forecast earnings for FY2022-23 by 3-5 per cent, while its TP of S$4.50 translates to 3.1 times price-to-book (P/B) value, which is just below the stock's five-year average P/B, DBS said.

Separately, CGS-CIMB has upgraded its rating on SIA to "add" from "hold", and raised its TP on the national carrier to S$4.57, from S$3.46 previously.

"We upgrade our recommendation on SIA to incorporate a better risk-reward balance from three perspectives - SIA's balance sheet strength, the Singapore government's efforts to gradually open its borders, and the potential introduction of Covid-19 vaccines sometime during 2021," wrote CGS-CIMB analyst Raymond Yap in a research note on Monday.

He added that downside surprises are limited, with aircraft assets already impaired and its equity capital raising completed.

On Tuesday, SIA announced that it has upsized its multicurrency medium-term note programme limit to S$10 billion, from S$5 billion previously. This comes shortly after the carrier last week said its new S$850 million five-year convertible bonds have been upsized amid strong investor interest, and will carry a 1.625 per cent coupon.

Meanwhile, analysts are also upbeat on tourism-related stocks such as Genting Singapore. This comes on the back of vaccine optimism and the integrated resort operator's sequential earnings rebound in the July-September quarter. As at 1.35pm on Tuesday, Genting Singapore shares were trading at 82 Singapore cents, up 1.5 cents or 1.9 per cent.