Advertisement
Singapore markets close in 5 hours 15 minutes
  • Straits Times Index

    3,172.25
    +0.32 (+0.01%)
     
  • Nikkei

    39,596.29
    -144.15 (-0.36%)
     
  • Hang Seng

    16,598.49
    -138.63 (-0.83%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Bitcoin USD

    65,028.11
    -2,953.82 (-4.35%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,149.42
    +32.33 (+0.63%)
     
  • Dow

    38,790.43
    +75.66 (+0.20%)
     
  • Nasdaq

    16,103.45
    +130.27 (+0.82%)
     
  • Gold

    2,165.10
    +0.80 (+0.04%)
     
  • Crude Oil

    82.58
    -0.14 (-0.17%)
     
  • 10-Yr Bond

    4.3400
    +0.0360 (+0.84%)
     
  • FTSE Bursa Malaysia

    1,550.94
    -2.70 (-0.17%)
     
  • Jakarta Composite Index

    7,347.48
    +45.03 (+0.62%)
     
  • PSE Index

    6,889.03
    +35.74 (+0.52%)
     

Finally, the worst is over for Singapore Airlines' cargo unit

Thanks to freighter fleet capacity cut.

According to Barclays, following three years of weak profitability, they expect SIA to see a rebound in profits on the back of improved yields as the overcapacity situation eases in 2HFY3/15E and the global economy is expected to emerge from a period of low growth then.

The significant operating leverage in its business also implies that the rebound in profits will be powerful (FY3/14E-17E EPS CAGR: 51%).

Here's more from Barclays:

Relative to its historical level of profitability, our EBIT margin forecasts are conservative and remain significantly below average EBIT margins of approximately 10% that was achieved prior to the global financial crisis.

Furthermore, losses at its cargo unit, which had been a significant drag on group profitability (Figure 16), appear to be have reversed.

SIA Cargo finally recorded a profitable quarter, albeit a marginal one, in 3QFY3/14 after the airline successfully stemmed losses (10 consecutive quarters up until 2QFY3/14) by reducing its freighter fleet capacity from 13 to nine which was followed by a SGD293m impairment charge being accounted for.

In our view, the worst is over for the cargo business. Going forward, we expect this rationalisation of capacity to position its cargo operations to stay profitable amid a pickup in the trade cycle.

ADVERTISEMENT



More From Singapore Business Review