SIAEC – MayBank Kim Eng
Customer Fleet Growth A Positive
VietJetAir to expand A320 fleet, boon for SIAEC’s FMP service. VietJetAir, a Vietnam-based low-cost carrier, announced recently that it has signed a memorandum of understanding with Airbus for up to 92 A320s (42 A320neo, 14 A320ceo, six A321ceo and 30 purchase rights). It also said it will lease another eight A320s from third-party lessors. This means there is scope for SIAEC to extend the service contract under its Fleet Management Programme (FMP) to the future fleet of A320s, given that VietJetAir is an existing customer. The A320 family of aircraft forms the bulk of the fleet under its management and we believe this business segment will benefit from economies of scale as its customers continue to expand their fleet.
Changi Airport traffic growing from strength to strength. A total of 29,600 landings and take-offs were recorded at Changi Airport in Aug 2013, up 8.2% YoY. The increase was driven by a sustained uptrend in traffic growth momentum over the past few months. Longer term, traffic growth at the airport will remain highly visible as Singapore aims to double its terminal handling capacity by mid-2020s. As a dominant player at Changi Airport, we expect this development will keep SIAEC’s line maintenance division highly profitable.
Cash pile too high; time to review conservative capital structure? Over the past two years, we note that SIAEC has been hoarding cash and believe that it should increase its dividend distribution to shareholders. While the SIA Group has little problem funding the huge aircraft orders placed over the past year, we think SIAEC should return the excess cash to its parent company, which can then be redeployed to fund these future capital expenditure. In other words, perhaps the time is ripe for SIAEC to conduct a radical review of its conservative balance sheet and consider a more aggressive capital structure.
Top pick in the sector, reiterate BUY. SIAEC is our top pick in Singapore’s Transportation space as it is a pure play to the aviation growth story in the region.
Reiterate BUY with TP of SGD6.19.
SIAEC – MayBank Kim Eng
Customer Fleet Growth A Positive
VietJetAir to expand A320 fleet, boon for SIAEC’s FMP service. VietJetAir, a Vietnam-based low-cost carrier, announced recently that it has signed a memorandum of understanding with Airbus for up to 92 A320s (42 A320neo, 14 A320ceo, six A321ceo and 30 purchase rights). It also said it will lease another eight A320s from third-party lessors. This means there is scope for SIAEC to extend the service contract under its Fleet Management Programme (FMP) to the future fleet of A320s, given that VietJetAir is an existing customer. The A320 family of aircraft forms the bulk of the fleet under its management and we believe this business segment will benefit from economies of scale as its customers continue to expand their fleet.
Changi Airport traffic growing from strength to strength. A total of 29,600 landings and take-offs were recorded at Changi Airport in Aug 2013, up 8.2% YoY. The increase was driven by a sustained uptrend in traffic growth momentum over the past few months. Longer term, traffic growth at the airport will remain highly visible as Singapore aims to double its terminal handling capacity by mid-2020s. As a dominant player at Changi Airport, we expect this development will keep SIAEC’s line maintenance division highly profitable.
Cash pile too high; time to review conservative capital structure? Over the past two years, we note that SIAEC has been hoarding cash and believe that it should increase its dividend distribution to shareholders. While the SIA Group has little problem funding the huge aircraft orders placed over the past year, we think SIAEC should return the excess cash to its parent company, which can then be redeployed to fund these future capital expenditure. In other words, perhaps the time is ripe for SIAEC to conduct a radical review of its conservative balance sheet and consider a more aggressive capital structure.
Top pick in the sector, reiterate BUY. SIAEC is our top pick in Singapore’s Transportation space as it is a pure play to the aviation growth story in the region.
Reiterate BUY with TP of SGD6.19.
September 2013
STI = 3167.87 (+138.93 for the Month)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY12 (Dec) |
17.60 |
12.00 |
$2.610 |
4.598% |
14.83 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY13 (Mar) |
6.435 |
6.25 |
$1.265 |
4.941% |
19.66 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.110 |
5.839% |
17.87 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY13 (Mar) |
16.60 |
15.0 |
$3.260 |
4.601% |
19.64 |
Interim 5ct ; Final 6ct + Special 4ct |
|
SIA Engg |
FY13 (Mar) |
24.51 |
22.0 |
$4.860 |
4.527% |
19.83 |
Interim 7ct ; Final 15ct |
|
ST Engg |
FY12 (Dec) |
18.76 |
16.8 |
$4.170 |
4.029% |
22.23 |
Interim 3ct ; Final 4ct + Special 9.8ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY12 (Dec) |
6.01 |
3.00 |
$1.350 |
2.222% |
22.46 |
Interim 1.35ct ; Final 1.65ct |
|
ComfortDelGro |
FY12 (Dec) |
11.89 |
6.40 |
$1.970 |
3.249% |
16.57 |
Interim 2.9ct ; Final 3.5ct |
|
SMRT |
FY13 (Mar) |
5.5 |
2.50 |
$1.290 |
1.938% |
23.45 |
Interim 1.5ct ; Final 1.0ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY13 (Mar) |
22.02 |
16.8 |
$3.730 |
4.504% |
16.94 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY12 (Dec) |
16.1 |
14.6 |
$3.280 |
4.451% |
20.37 |
Interim 6.6ct ; Final 6.3ct + Special 1.7ct |
|
StarHub |
FY12 (Dec) |
20.93 |
20 |
$4.290 |
4.662% |
20.50 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar13 |
A4.1 (Gross) |
$1.395 |
6.890% |
A$0.91 |
1H13 A4.1ct ; 2H13 A4.1ct |
|
MIIF |
FY13 – Guidance |
1.90 |
$0.197 |
9.645% |
$0.250 |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) ; Capital Return = 44.329ct + 1.04ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1721) fm Yahoo
NOTES :
- Mkt Price is as on 30-Sep-13
- MIIF : 1H13 (Jun) –0.7ct
- ComfortDelgro : Q213 (Jun) –3ct
- ST Engg : 1H13 (Jun) – 3ct
- SBSTransit : Q213 (Jun) – 0.9ct
- HLFin : 1H13 (Jun) – 4ct
- StarHub : Q213 (Jun) – 5ct ; Q113 (Mar) – 5ct
- SingPost : Q413 Q114 (Jun13) – 1.25ct
- M1 : 1H13 (Jun) – Interim 6.8ct
- MIIF : FY13 Guidance 1H13 (Jun) –0.7ct ; 2H13 (Dec) – 1.2ct (Final) ; APTT IPO Entitlement / 1000 MIIF Shares (Estimate) = 457 APTT Shares or $443.29
- SPAus : 2H13 (Mar13) – A4.1ct = A1.367ct (Franked) + A2.649ct (Interest) + A0.084ct (Capital Returns) ; 1H13 (Sep12) – A4.1ct = A1.367ct (Franked) + A2.467ct (Interest) + A0.266ct (Capital Returns)
- SPAus : FY14 Guidance = A8.36ct
- SATSvcs : 2H13 (Mar13) – Final 6ct + Special 4ct ; 1H13 (Sep12) – Interim 5ct
- SingTel : 2H13 (Mar) – Final 10ct ; 1H13 (Sep12) – Interim 6.8ct ; Div Policy – 60% to 75% of Underlying Net Profit
- SIAEC : Q413 (Mar13) – Final 15ct ; Q213 (Sep12) – Interim 7ct
- SMRT : Q413 (Mar13) – Final 1.0ct ; Q213 (Sep12) – Interim 1.5ct
- SPH : 1H13 (Feb) – Interim = 7ct
- StarHub : FY13 Div Guidance – 5ct/Q
September 2013
STI = 3167.87 (+138.93 for the Month)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY12 (Dec) |
17.60 |
12.00 |
$2.610 |
4.598% |
14.83 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY13 (Mar) |
6.435 |
6.25 |
$1.265 |
4.941% |
19.66 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.110 |
5.839% |
17.87 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY13 (Mar) |
16.60 |
15.0 |
$3.260 |
4.601% |
19.64 |
Interim 5ct ; Final 6ct + Special 4ct |
|
SIA Engg |
FY13 (Mar) |
24.51 |
22.0 |
$4.860 |
4.527% |
19.83 |
Interim 7ct ; Final 15ct |
|
ST Engg |
FY12 (Dec) |
18.76 |
16.8 |
$4.170 |
4.029% |
22.23 |
Interim 3ct ; Final 4ct + Special 9.8ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY12 (Dec) |
6.01 |
3.00 |
$1.350 |
2.222% |
22.46 |
Interim 1.35ct ; Final 1.65ct |
|
ComfortDelGro |
FY12 (Dec) |
11.89 |
6.40 |
$1.970 |
3.249% |
16.57 |
Interim 2.9ct ; Final 3.5ct |
|
SMRT |
FY13 (Mar) |
5.5 |
2.50 |
$1.290 |
1.938% |
23.45 |
Interim 1.5ct ; Final 1.0ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY13 (Mar) |
22.02 |
16.8 |
$3.730 |
4.504% |
16.94 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY12 (Dec) |
16.1 |
14.6 |
$3.280 |
4.451% |
20.37 |
Interim 6.6ct ; Final 6.3ct + Special 1.7ct |
|
StarHub |
FY12 (Dec) |
20.93 |
20 |
$4.290 |
4.662% |
20.50 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar13 |
A4.1 (Gross) |
$1.395 |
6.890% |
A$0.91 |
1H13 A4.1ct ; 2H13 A4.1ct |
|
MIIF |
FY13 – Guidance |
1.90 |
$0.197 |
9.645% |
$0.250 |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) ; Capital Return = 44.329ct + 1.04ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1721) fm Yahoo
NOTES :
- Mkt Price is as on 30-Sep-13
- MIIF : 1H13 (Jun) –0.7ct
- ComfortDelgro : Q213 (Jun) –3ct
- ST Engg : 1H13 (Jun) – 3ct
- SBSTransit : Q213 (Jun) – 0.9ct
- HLFin : 1H13 (Jun) – 4ct
- StarHub : Q213 (Jun) – 5ct ; Q113 (Mar) – 5ct
- SingPost : Q413 Q114 (Jun13) – 1.25ct
- M1 : 1H13 (Jun) – Interim 6.8ct
- MIIF : FY13 Guidance 1H13 (Jun) –0.7ct ; 2H13 (Dec) – 1.2ct (Final) ; APTT IPO Entitlement / 1000 MIIF Shares (Estimate) = 457 APTT Shares or $443.29
- SPAus : 2H13 (Mar13) – A4.1ct = A1.367ct (Franked) + A2.649ct (Interest) + A0.084ct (Capital Returns) ; 1H13 (Sep12) – A4.1ct = A1.367ct (Franked) + A2.467ct (Interest) + A0.266ct (Capital Returns)
- SPAus : FY14 Guidance = A8.36ct
- SATSvcs : 2H13 (Mar13) – Final 6ct + Special 4ct ; 1H13 (Sep12) – Interim 5ct
- SingTel : 2H13 (Mar) – Final 10ct ; 1H13 (Sep12) – Interim 6.8ct ; Div Policy – 60% to 75% of Underlying Net Profit
- SIAEC : Q413 (Mar13) – Final 15ct ; Q213 (Sep12) – Interim 7ct
- SMRT : Q413 (Mar13) – Final 1.0ct ; Q213 (Sep12) – Interim 1.5ct
- SPH : 1H13 (Feb) – Interim = 7ct
- StarHub : FY13 Div Guidance – 5ct/Q
Airport Services – CIMB
The sky is the limit
Despite the sharp fall in ASEAN currencies, Changi Airport’s traffic rose by 8.2% yoy in Aug2013 (the highest since Apr 2012) to reach a record high of955 flights per day. Travel to and from neighbouring Indonesia and Malaysia registered particularly strong growth.
We maintain our Overweight recommendation on the sector. SATS is our top pick, given its attractive valuation of 16x CY14 P/E and better liquidity. There are no changes to our EPS, recommendations and target prices. The catalysts for the sector are Changi’s stronger-than-expected volume growth and higher dividends.
What Happened
Singapore Changi Airport released its Aug 2013 traffic statistics, which revealed that the flights handled increased by 8.2% yoy to a new record high of 955 flights/day. Passengers handled rose 9.4% yoy to 4.68m. Travel demand in Aug was boosted by the extra long weekend, thanks to the Hari Raya Puasa and National Day public holidays in Singapore. Traffic between Singapore, China and Japan also grew by double-digits.
What We Think
Changi Airport’s better-than-expected passenger movements are encouraging because the ASEAN region was embroiled in foreign currency volatility in the past few months.
Due to capital outflows, the Malaysian ringgit (RM) weakened against the S$ by 0.8% mom in July and a further 2.3% mom in Aug. The Indonesian rupiah (Rp) fell against the S$ by 0.9% mom in July and 5.1% in Aug, and depreciated by a further 6% mom in Sep but has since stabilised, albeit at the lower level of Rp9,000 to the S$ (vs. Rp8,000 in Jun 2013). The RM recovered against the S$ by 0.1% mom in Sep.
Although the weaker regional currencies may impact outbound travel in the near term, the macro outlook for Southeast Asia remains positive. This supports our expected 2014 rebound in outbound travel. We forecast that the average GDP growth in Indonesia, Thailand and Malaysia will rebound from 4.8% in 2013 to 5.2% in 2014 and 5.7% in 2015 (vs. 6.1% in 2012). Furthermore, the strong traffic growth between Singapore, China and Japan appears sustainable, given the improved economic outlook for North Asia.
What You Should Do
Stay invested in SIE and SATS. We expect share price upside in both companies from higher volumes in line maintenance and gateway services, given the positive statistics.