Excluding the 20% privatisation premium, the analysts say their fundamental target price would be at $1.50.
“A privatisation scenario is one of the key catalysts for the stock. Faster than expected vaccine rollouts and speedy restoration of international flights will also help the stock to re-rate,” they note.
That said, Sarkar and Sum foresee a long-drawn recovery ahead for the group, as recovery in flight traffic remains “very slow” at Changi Airport.
“The absence of a domestic aviation market in Singapore will continue to constrain SIA Engineering’s earnings recovery over the next few quarters,” they add.
See also: UOB Kay Hian starts NTT DC REIT at ‘buy’, sees 42% upside
For more stories about where the money flows, click here for our Capital section
SIA Engineering did not declare any interim dividend in 1HFY2020/2021 ended September. A final dividend, say the analysts, may not happen in FY2021, thus removing one of the key share price supports, view the analysts.
Given the second and third wave of Covid-19 infections and the slow rate of vaccine rollouts, the analysts say they are now more “bearish” on SIA Engineering’s recovery potential in FY2022.
Shares in SIA Engineering closed 6 cents higher or 3.2% up at $1.93 on Feb 2.
See also: SIA Engineering bets on servicing narrow-body planes ahead of recovery
