SINGAPORE AIRLINES (-) : FY26 result in line; fuel price impact to kick in from 1QFY27

Research evidence excerpt

SINGAPORE AIRLINES (-) : FY26 result in line; fuel price impact to kick in from 1QFY27

Investment case, valuation and risks

Singapore Airlines (Underperform, Target Price SGD5.8)

Investment case

During Covid, SIA's combined market share in Singapore dipped from 57.5% in 2019

to 56.9% in 2024. This resulted in a less meaningful profitability improvement for SIA,

compared with peers, since Covid. In addition, SIA has larger exposure to Boeing

compared with its APAC peers. In particular, SQ has an all-Boeing passenger aircraft

orderbook of 46 aircraft, which exposes it to the production cap for B737 MAXs (8

aircraft) and certification uncertainty for the B777X (31 aircraft). Scoot is better placed

with no Boeing exposure in the narrow-body segment.

Valuation methodology

We value Singapore Airlines using the average equity valuations arrived using target

EV/EBITDA multiple and P/BV multiple. The target EV/EBITDA methodology reflects the

valuation of an airline company as an operational asset, which can capture near-term

profitability trends. Note that we prefer using EV/EBITDA over P/E for Singapore Airlines,

as the P/E multiple is affected by capital structure and thus is not always directly

comparable with peers as a clear illustration of operational quality. On the other hand,

the target P/B multiple reflects the valuation for an airlines' shareholder interest after

excluding the financial leverage, which is less sensitive to near-term earnings but can

capture the quality of investment decisions over the long-term.

Risks

To the upside:

(1) Stronger-than-expected demand growth on long-haul routes to the US/Europe; and

(2) faster-than-expected production rate and delivery.

To the downside:

(1) Weaker-than-expected demand growth on long-haul routes to the US/Europe; and