“In many route regions, SIA has restored its seat capacity to above its March 2019 levels, such as to the Middle East (110.7%), to Southwest Pacific (106.5%), to South Asia (103.1%), and to Northeast Asia ex-China (102.9%). The cancellation of SIA’s flights to Moscow since the February 2022 Russian invasion of Ukraine is the main reason why SIA is unlikely,” he adds.
SIA will be releasing its results for the quarter and the FY2024 after trading hours on May 15.
For the 4QFY2024, Yap expects the airline to post a “good” core net profit of $550 million, albeit 14.5% lower q-o-q due to the sequential decline in passenger and cargo yields. The 3QFY2024 is also a seasonally strong quarter due to the year-end peak season. The airline also recognised some tax benefits in the 3QFY2024, which will likely not be repeated.
Yap also expects SIA to report an ebit of $600 million for the 4QFY2024, 1.5% lower q-o-q.
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“Y-o-y, we believe 4QFY2024 core net profit was likely slightly above 4QFY2023, although the rate of y-o-y expansion in core net profit was probably the weakest in the past four quarters, in line with the ongoing and well-established trend of y-oy declines in passenger and cargo yields as well as rising opex pressure from supplier cost hikes,” he writes.
In FY2024, SIA is estimated to report a core net profit of $2.5 billion for the FY2024, 32% higher y-o-y, and likely to be the highest in the airline’s history, says Yap.
For the 4QFY2024 and FY2024, the analyst sees SIA declaring a final dividend per share (DPS) of 38 cents, bringing SIA’s full-year DPS to 48 cents. The airline already declared an interim dividend of 10 cents per share.
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“Our final DPS forecast of 38 cents is based on a full-year payout ratio of 53.1%, roughly in line with FY2023’s 52.3% payout ratio,” says Yap.
“The final DPS of 38 cents will provide investors with a very respectable yield of 5.8% over a short holding period of three months; SIA’s shares will likely trade ex-dividend in late-July/early-August FY2024 and the dividend will likely be paid in August 2024,” he adds.
However, the analyst recognises that SIA may announce an even higher payout than the 53.1% he has assumed for FY2024.
“In the last major cyclical earnings peak in FY2008, SIA’s dividend payout was 58%, which implies final DPS of 42 cents for FY2024, representing 6.4% yield,” he points out.
Despite the positives, Yap sees the airline’s yields to continue declining gradually in the coming years as other airlines continue to restore their seat capacities.
He also expects SIA to face more operating expense (opex) pressure going ahead with suppliers such as ground handlers passing on their higher operating costs.
As at 1.56pm, shares in SIA are trading 1 cent lower or 0.15% down at $6.54.
