Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD
Research House: UOB KayHian
Kim Eng says its sensitivity analysis indicates every US$10/bbl increase in jet kerosene reduces SIA’s earnings by about $300 million, excluding hedges.
Company Name: SINGAPORE AIRLINES LTD
Research House: UOB KayHian
Singapore Airlines (C6L.SG) is down 2.2% at $13.56, with 3.85 million shares traded in a fairly sharp fall for the low beta stock as investors fret over the impact of higher oil prices on the carrier’s costs. Oil prices rose more than US$2.00/bbl in early trade in Asia, due to concerns over the Middle East turmoil disrupting supply.
Kim Eng says its sensitivity analysis indicates every US$10/bbl increase in jet kerosene reduces SIA’s earnings by about $300 million, excluding hedges.
UOB KayHian, says “we expect airlines to continue to underperform in an environment of rising prices and/or a period of volatile prices. While full service carriers have a fuel surcharge component pegged to fuel prices, they will at best offset only about 50% of cost increases.”
It adds, if fuel prices remain at current levels for more than a month, “this will impact traffic and the sector could be de-rated further.” It says SIA, rated Buy with a $15.00 target remains a sector top pick.
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