To The Moon

$SIA(C6L.SI)$ Singapore Airlines (SIA), a leading global carrier, is scheduled to announce its third-quarter earnings for the fiscal year ending March 2025 on February 20, 2025, before market opening. As at time of writing on February 19, 2025, the stock is trading at S$6.40.

Analyst Expectations

Analysts project a core net profit of S$550 million to S$600 million for the October-December 2024 quarter (3QFY3/25F), marking an improvement from the S$367 million average per quarter in the first half of FY25. This positive outlook is attributed to several key factors:

• Decline in Jet Fuel Prices: A reduction in fuel costs is expected to enhance profitability.

• Seasonal Passenger Demand: The holiday season typically boosts passenger traffic and yields.

• Increased Cargo Yields: A rise in cargo rates is anticipated to contribute positively to revenue.

Key Drivers

Positive Factors:

• Robust Passenger Demand: SIA has reported strong passenger demand, particularly during the holiday season, which is expected to continue into the third quarter.

• Strategic Partnerships: The airline's renewed title sponsorship of the Formula 1 Singapore Grand Prix for another four years enhances brand visibility and aligns with its premium service image.

Negative Factors:

• Increased Competition: The airline industry is facing heightened competition, which may pressure yields and market share.

• Operational Challenges: Recent incidents, such as severe turbulence on Flight SQ321, have prompted SIA to tighten cabin safety measures, potentially affecting operational efficiency.

Risks and Opportunities

Risks:

• Economic Uncertainty: Global economic fluctuations could impact travel demand and consumer spending.

• Regulatory Changes: Potential changes in aviation regulations may affect operational costs and procedures.

Opportunities:

• Fleet Modernization: SIA's investment of S$1.1 billion to retrofit its Airbus A350 fleet aims to enhance fuel efficiency and passenger comfort, potentially leading to cost savings and increased competitiveness.

• Expansion into Emerging Markets: Strategic investments in partnerships, such as the merger of Air India and Vistara, position SIA to tap into the growing Indian aviation market.

Investment Considerations

SIA's commitment to fleet modernization and strategic partnerships underscores its focus on long-term growth and profitability. The airline's strong brand reputation and premium service offerings continue to attract a loyal customer base.

Trading Ideas

1. Long Position Post-Earnings: If SIA's earnings report meets or exceeds analyst expectations, consider initiating a long position in the stock, targeting a price of S$7.00 within the next three months.

2. Leveraged Exposure via Daily Leverage Certificates (DLCs): For investors seeking amplified returns, consider using a long DLC that tracks SIA's stock performance. This instrument offers leveraged exposure to the stock's movements, allowing for potential higher gains in a shorter timeframe.

Conclusion

Singapore Airlines' upcoming earnings report is a critical indicator of its financial health and strategic direction. While challenges such as increased competition and operational risks exist, the airline's strategic initiatives and strong market position present promising opportunities for investors. Monitoring the earnings release closely will be essential for informed investment decisions.

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