While he is positive on this trend, the analyst remains cautions of disappointing cargo statistics from Mar-May, with SIA Cargo having posted negative growth in cargo load factor (CLF) in May 2018 on the pace of demand falling behind capacity changes across all route regions.
“Recall that SIA Cargo recorded solid growth in operating profit for FY18 on the back of strong air cargo demand as well higher cargo yield. However, while Jan 18 and Feb 18 continued to register positive y-o-ygrowth in CLF, SIA Cargo’s CLF y-o-y decline started in Mar 18 (-2.8ppt) and accelerated in Apr 18 (-3.0ppt) as well as in May 18 (-3.9ppt),” notes Chua.
As a result, he believes SIA’s FY18 strong cargo performance is unlikely to repeat in FY19 assuming the downward trend for SIA cargo demand persists into the rest of the latter year.
“The on-going trade spat between US, China and European countries will not help if it results in lower global trade volume on imposition of higher tariffs,” adds the analyst.
As at 2.54pm, shares in SIA are trading 1 cent higher at $11.02 or 16.6 times FY19F earnings.
