According to Yap, SIA’s share price has done “very well” in the run-up to the 30-cent FY2025 final dividend per share (DPS) ex-date on Aug 8.
“We note that upon the ex-date on Aug 1, 2024 for FY2024’s 38-cent final DPS, SIA’s share price corrected by a higher quantum of 66 cents from $7.53 on July 31, 2024 to $6.87 on Aug 31, 2024. SIA’s share price is now trading at a historical price-to-book of 1.45 times, close to 3 standard deviations above the mean since 2011, which we view as very rich,” says Yap.
Air India’s wider losses
The sharp fall in net profit was largely attributable to a lower interest income, which declined $61 million y-o-y on the back of lower cash balances and interest rate cuts, along with the group recording a share of losses of Air India’s financial results, which were not part of the group’s results for 1QFY2025.
See also: SIA slips nearly 8.7% after 1QFY2026 earnings miss
SIA started equity accounting for Air India’s financial performance from December 2024 following the full integration of Vistara into Air India.
While Yap thinks Air India’s weak results for 1QFY2026 may have been due to one-off compensation provisions for the 787-8 crash at Ahmedabad, India on June 12, Air India’s subsequent financial performance may be weak.
This is in light of the 15% cut in its wide-body international flights and 5% of its narrow-body flights in the immediate aftermath of the crash, according to Reuters, which also reported that Air India will restore some flights from Aug 1, with full restoration planned from Oct 1.
However, Yap suspects demand for Air India, along with pricing, “may need more time to fully recover”. “We have pencilled in SIA’s share of losses for Air India at $250 million for FY2026 and $200 million for FY2027, wider than $75 million p.a. previously.”
Upsides
Still, Yap notes that SIA’s Singapore pax and cargo businesses continued to do well, with 1QFY2026 operating profit at $405 million, up 42% q-o-q, from robust pax volumes and supported by lower fuel costs as average jet fuel prices fell from US$90 per barrel in 4QFY2025 to US$81 per barrel in 1QFY2026.
During 1QFY2026, SIA also benefitted from a 8.4% q-o-q rise in cargo demand due to frontloading activity to avoid US import tariffs, leading to narrower q-o-q losses at the cargo arm.
In addition, the depreciation of the US dollar from $1.35 in 4QFY2025 to $1.30 in 1QFY2026 will benefit SIA since about two-thirds of its operating costs are probably denominated in US dollars, according to Yap.
As at 10.53am, shares in SIA are trading 54 cents lower, or 7.11% down, at $7.06.
Read more about SIA's 1QFY2026 results:
