SIA expected to recover to pre-COVID levels by FY2024

Pfizer, BioNtech’s latest vaccine developments are a positive news for the airlines.

It will take Singapore Airlines (SIA) at most three years to return to pre-COVID levels, assuming that a vaccine will be ready by mid-2021, according to estimates by OCBC Investment Research.

The airlines’ latest results disappointed analysts, landing significantly below OCBC’s forecasts and Bloomberg’s consensus. The airline’s H1 FY2021 revenue plunged 80.4% YoY to $1.6b on the back of weak passenger flown revenue, partially offset by higher cargo and mail revenue. PATMI reversed from a profit of $205.6m to a record loss of $3.5b during the first half of the year fiscal year due to weak operating performances, fuel hedging ineffectiveness and impairment loss.

There is a light does exist in the end of the tunnel: the announcement of a vaccine by Pfizer and BioNtech. Both vaccines are reportedly at 90% effective, according to latest results. This presents positive news for travel-related stocks, SIA included.

UOB Kay Hian analyst K Ajith also noted that any newsflow of an effective vaccine by end-2020 will aid confidence in SIA stock. Such an event could lead to advance bookings and boost SIA’s chances to raise funds.

“We believe the SIA brand still commands tremendous brand loyalty, which could lead to strong pricing power when demand eventually returns,” Ajith noted.

However, its lack of domestic market meant that its recovery will be at a slower pace. As a result, OCBC Investment Research expects SIA to recover to pre-pandemic levels by FY2024, assuming that a vaccine be available by 2024.

OCBC have raised fair value estimates from $3.5 to $3.7.

Meanwhile, UOB’s Ajith expects SIA to issue $6.2b in mandatory convertible bonds (MCB) by March 2021.

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