Analysts say SIA is fairly valued, with several raising target price
[SINGAPORE] Analysts have commented that the share price of Singapore Airlines (SIA) is fairly valued at the moment, even as several lifted their target price and recommended a 'hold' on the stock, after the airline group published its financial year 2025 financial results.
Their projections for FY2026 net profit range from S$900 million to S$1.4 billion.
SIA posted on May 15 a 3.9 per cent rise in its bottom line to a record S$2.8 billion for the full year, boosted by a one-off, non-cash gain of S$1.1 billion from the Air India-Vistara merger. Revenue was at S$19.6 billion, up 2.8 per cent.
Analysts from CGS International, DBS, UOB Kay Hian (UOBKH) and OCBC all raised their target price for the airline group to a range of S$6.40 to S$6.88, but Lorraine Tan of Morningstar cut her fair value projection by 5 per cent to S$6.10.
Tan expects SIA's operating margin cut to 4.7 per cent and 7.4 per cent for FY2026 and FY2027, respectively, from 8.7 per cent in FY2025 and 14.7 per cent in FY2024, as yields continue to normalise amid supply increases. Current yields, however, remain over 10 per cent above pre-pandemic levels.
She lowered her target price to S$6.10 to reflect lower near-term profitability, but she flagged that SIA's yields and load factors could be hit by the low-cost offerings of Chinese carriers as they ramp up their international route capacity.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
Her FY2026 net profit forecast is about S$900 million.
CGS' Raymond Yap expects that SIA could benefit from the drop in Brent oil price and an appreciation in the Singapore dollar against the greenback, as he adjusted SIA target price from S$6 to S$6.88.
He said Brent price decreased to US$66 a barrel in April to May from US$76 a barrel in January to March, while the Singapore dollar rose to S$1.30 currently from S$1.34 as at Mar 31.
However, he reduced the cargo and passenger yield assumptions for SIA, as the global business uncertainty brought about by the US 'Liberation Day' tariffs will eventually moderate business travel and cargo demand, and flagged this as the key downside risk from the quarter ending September.
Yap's FY2026 net profit estimate is about S$1.2 billion.
Analysts from DBS projected cargo could remain more resilient than previously anticipated, as they pointed out that SIA's cargo volumes rose 4 per cent year on year in April, despite trade frictions between the US and its trading partners, and global freight market volatility.
They expect the US-China truce in the tariff war to spark front-loading of shipments in the coming months. They said this might lead to upside surprises in cargo volumes and yields as SIA derives about 11 per cent of its revenue from cargo, and its US cargo exposure is about 8 per cent.
DBS' FY2026 net profit projection is about S$1.1 billion
UOBKH expects SIA's FY2026 core net profit to drop 8 per cent year on year, as it will reflect the full-year impact of Air India's negative contribution while the Indian airline undergoes a multi-year turnaround, with limited visibility on its profitability timeline.
However, the analyst expects SIA to generate S$1.4 billion in net profit for FY2026.
In 2024, Vistara was merged with Air India, resulting in SIA holding a 25.1 per cent share in the merged entity.
OCBC raised SIA's target price to S$6.80 from S$6.50, and projects the airline group's bottom line to be about S$1.2 billion for FY2026.
SIA shares were trading 0.3 per cent of S$0.02 higher at S$6.90 at 1.24 pm on Monday.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
3 hours ago
- Business Times
Taiwan imposes technology export controls on Huawei, SMIC
Taiwan has blacklisted Huawei Technologies and Semiconductor Manufacturing International Corp (SMIC), dealing another major blow to the two companies spearheading China's efforts to develop cutting-edge AI chip technologies. Taiwan's International Trade Administration has included Huawei, SMIC and several of their subsidiaries in an update of its so-called strategic high-tech commodities entity list, according to the latest version that was made available on its website on Saturday (Jun 14). It didn't publicly announce the change. According to Taiwan's existing regulations, local companies will require approval from the island's government before they can ship anything to users on the entity list. In 2023, Bloomberg News reported that several Taiwanese companies were helping Huawei build infrastructure for an under-the-radar network of chip plants across southern China. The new restrictions imposed by Taipei are likely to at least partially cut off Huawei and SMIC's access to Taiwan's plant construction technologies, materials and equipment essential to build AI semiconductors, such as those made by Taiwan Semiconductor Manufacturing Co (TSMC) for the likes of Nvidia Corp. In Huawei's case, several of its overseas units including in Japan, Russia and Germany were also captured in the update to Taiwan's entity list. Both Huawei and SMIC – and some of their subsidiaries – are also on the US entity list, which has significantly limited the companies' ability to acquire foreign technology. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Huawei and SMIC didn't immediately respond to requests for comment outside of regular office hours. While Taiwan has for years imposed certain blanket bans on the shipments of critical chipmaking equipment including lithography machines to China, it hasn't included leading Chinese tech companies or chipmakers on its entity list previously. TSMC, the go-to chipmaker for Apple and Nvidia, cut off its supplies to Huawei in 2020 because of US export controls. Huawei, together with SMIC, shocked American politicians in 2023 by releasing an advanced, made-in-China 7-nanometre chip. While the two are struggling to improve their technologies due to various curbs, they are still China's best hope to help fill in the AI chip gap left by a lack of Nvidia's most sophisticated semiconductors. Tensions between Taiwan and China also stepped up a notch earlier this year after Taiwan President Lai Ching-te labelled China a 'foreign hostile force' for the first time and unveiled wide-ranging measures to counter infiltration efforts. China claims the self-governing democracy as its territory and has vowed to unify with Taiwan, using force if necessary. BLOOMBERG
Business Times
3 hours ago
- Business Times
China's biotech moment ignites a 60% stock rally that beats AI
China's biotechnology stocks have shaken off a four-year slump to be among the hottest performers in Asia this year and funds are tipping further gains. The Hang Seng Biotech Index has surged more than 60 per cent since the start of January amid investor enthusiasm over a pair of billion-dollar deals involving foreign firms licensing Chinese drugs. Share gains at two highly anticipated listings of local producers have further burnished the sector's appeal. 'China biotech is no longer just an emerging story – unlike 10 years ago – it is now a disruptive force reshaping global drug innovation,' said Yiqi Liu, senior investment analyst at Exome Asset Management in New York. 'The science is real, the economics are compelling, and the pipeline is starting to deliver.' The surge in China-listed biotech firms is further evidence that the mainland is becoming a centre for global innovation. The rally in the sector this year outpaces the 17 per cent gain in China's tech stocks that was driven by the release of DeepSeek's breakthrough artificial-intelligence app in January. A major reason for the share gains were two mega-sized licensing deals. Pfizer said on May 19 that it had agreed to pay a record US$1.25 billion to license an experimental cancer drug from China's 3SBio, and also invest US$100 million in the firm's shares. Two weeks later, Bristol-Myers Squibb said it would pay Germany's BioNTech as much as US$11.5 billion to license a cancer drug that BioNTech had itself licensed from China's Biotheus in 2023. Some of the gains in biotech shares this year have been stratospheric. 3SBio has surged 283 per cent, topping a Bloomberg gauge of global biotech stocks. RemeGen, which develops antibody drugs, has climbed more than 270 per cent after saying it was approached by multinational pharmaceutical firms for potential licensing deals. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up China's growing influence through pharmaceutical mergers and acquisitions and deal-making is also causing investors to take note. In the first quarter alone, the value of such deals involving local players doubled from the year before to US$36.9 billion. That amount made up more than half the global total of US$67.5 billion. Chinese biotech companies are having 'their own DeepSeek moment', said Dong Chen, chief Asia strategist at Pictet Wealth Management in Hong Kong. There is more upside from here, he said. Investor interest in biotech – which involves the use of living organisms to make medicines and other products – can be seen in the big runup at recent initial public offerings. Shares of Duality Biotherapeutics, which develops cancer treatments, more than doubled on their first day of trading in Hong Kong on Apr 15. Jiangsu Hengrui Pharmaceuticals, the nation's largest drugmaker by market value, saw its stock jump 25 per cent on its May 23 debut, even after being issued at the top end of the marketed range. Duality has now risen 189 per cent since its IPO, while Jiangsu has gained 31 per cent. Still, some say the rally may be getting stretched. 'Bears, mostly healthcare specialists, plan to take profit at this point, and some investors prefer the healthcare laggers with capability of constant dividend payout and stable revenue growth,' Bank of America analysts including Ethan Cui in Hong Kong wrote in a research note this month. Some investors also said they viewed the rush of recent licensing deals as a one-off, and they were refusing to grant valuation multiples to the companies, the analysts wrote. Talent returns While the recent ratcheting up of trade tensions between the US and China has been a negative for many mainland firms, it's also resulted in talent flowing back to China and creating more research-and-development capability, according to Nicholas Chui, a Chinese equity fund manager at Franklin Templeton in Hong Kong. Jefferies is also bullish, saying the increase in US tariffs is unlikely to prove an obstacle to Chinese biotech firms. Many of the Chinese biotech companies already have US partners and are therefore considered as service providers rather than product exporters, said Cui Cui, head of Asia healthcare research at the company in New York. BLOOMBERG
Business Times
3 hours ago
- Business Times
Oil market, long numb to war risk, confronts weekend of worry
The past two years of escalating tensions in the Middle East have taught oil traders to be sanguine about the risk of disruption to oil supplies. The barrage of headlines has revived memories of the political upheavals and prices spikes of the 1970s – and yet even when oil prices have jumped, it inevitably proved short-lived. As Iran and Israel traded volleys of missiles in April last year and again in October, Middle Eastern oil continued to flow to the global market unaffected. Now, the latest assault by Israel is putting oil traders' nonchalance to the test. There's been no impact on supplies so far, but the strikes have shaken a market that for most of this year has been overshadowed by worries about a looming surplus driving down prices, with the Organization of the Petroleum Exporting Countries and its oil producing allies (Opec+) quickly unwinding production cuts and output rising elsewhere from Brazil to Guyana, while US President Donald Trump's trade war threatens demand. Even if many believe that the oil market may ultimately escape unscathed, the widespread uncertainty over how strongly Iran will respond, whether Israel will launch further attacks, and how the US will react is forcing traders to price in a huge range of possible outcomes. With hours left until the end of the trading week, few were brave enough to risk going into the weekend short. Brent futures spiked as much as 13 per cent early on Friday and settled 7 per cent higher at about US$74 a barrel. 'When there's a war on, you're not going to be short anything over the weekend,' said Andreas Laskaratos, chief executive officer of energy trading house AB Commodities. 'Although the fundamentals haven't changed, you can't trade against the headlines over the weekend.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Traders and analysts began to game out scenarios for possible escalation or de-escalation almost as soon as the first Israeli missiles hit Iran in the early hours of Friday morning. Laskaratos says his Europe-based traders were at their desks by about 4.30 am or 5.00 am. Analysts at Goldman Sachs raised their oil price forecasts for the coming months US$2-3 a barrel, but laid out possible scenarios ranging from a surge in prices above US$100 a barrel in the worst-case scenario, to a drop below US$50 next year in their most bearish scenario. 'The potential of further escalation in the Middle East implies that the short-term risks to our price forecast are now skewed to the upside,' the analysts including Daan Struyven wrote. Still, they maintained their call for prices to drop below US$60 by the fourth quarter of this year. A surge of trading in out-of-the money call options showed that many were seeking to hedge against the possibility of a price spike. Among the most traded options were call options that would pay out if prices rise above US$85 a barrel by Jun 25; a measure of the price of West Texas Intermediate (WTI) call options relative to the price of put options surged to the highest since March 2022, when the market was rocked by Russia's full-scale invasion of Ukraine. The most worrying possibility for the oil market is a disruption of shipping through the Strait of Hormuz, through which about one-fifth of global oil supply flows. Most analysts reckon that's unlikely. 'It is our understanding that it would be extremely difficult for Iran to close the strait for an extended period given the presence of the US Fifth Fleet in Bahrain,' said Helima Croft, head of global commodity strategy at RBC Capital Markets, and a former CIA analyst. Still, even if small, any increase in the chance of disruption is enough to drive prices. 'The possibility that the Strait of Hormuz closes is such a huge binary event, it makes forecasting balances challenging,' consultancy FGE NexantECA wrote in a report. 'Most market participants we have spoken to are not expecting the Strait of Hormuz to be closed; the consequences are just too great.' Other possible scenarios worrying oil traders include the possibility of strikes on Iran's oil infrastructure or the potential for sanctions against Iran to be ramped up if Teheran responds to the strikes by accelerating its nuclear programme. For now at least, most traders are viewing current events through the lens of recent history. 'For the past decade, events like this have been sell-the-rip situations. They didn't escalate. Fears were worse than what actually happened,' Dan Pickering, chief investment officer at Pickering Energy Partners, an energy-focused investment bank in Houston, wrote on X. The strikes may even turn out to be bearish. Trump on Friday called on Iran to make a deal or face 'even more brutal' attacks. If Teheran were to heed his advice, a nuclear deal would likely involve a relaxation of sanctions, potentially lifting Iran's exports. FGE NexantECA said that market participants were 'looking at the recent price action and starting to consider the events as a 'sell' opportunity'. 'However, they acknowledge that taking a short position right now is hard given the risk/expectation of further escalation in tensions in the weeks ahead.' Even if there is a disruption, Opec+ members Saudi Arabia and the United Arab Emirates have significant spare capacity that could be brought on to potentially help cool prices. 'It would take a lot of courage for someone to go against it but that said, we can't see this rally being sustained in the long term,' said Laskaratos of AB Commodities. 'We don't believe the fundamentals have changed on supply and demand as things stand.' BLOOMBERG
