To The Moon

Singapore Airlines ( $SIA(C6L.SI)$ ) has hit turbulence, with its Q1 2025 net profit nosediving 59% to S$186 million, sparking a sharp sell-off that pushed its stock to around SGD 7. The national carrier’s earnings miss, driven by losses from its Air India unit and lower interest income, has investors questioning whether this is a fleeting dip or a deeper descent. Despite the gloom, SIA’s revenue climbed 1.5% to S$4.79 billion, fueled by record travel volumes and robust cargo demand. With the stock now testing key support levels, is SGD 7 the bottom, or should investors brace for more? This report dives into SIA’s earnings, valuation, long-term prospects, and strategic investment approaches to navigate this volatile moment.

Q1 2025 Earnings: A Turbulent Quarter

SIA’s Q1 2025 results, reported on July 28, 2025, revealed significant challenges:

• Net Profit: Plummeted 59% to S$186 million from S$452 million in Q1 2024, missing analyst expectations of S$200 million, per The Business Times.

• Revenue: Rose 1.5% to S$4.79 billion, slightly above consensus forecasts of S$4.75 billion, driven by record passenger volumes (9.7 million passengers, up 7.2% year-over-year) and strong cargo demand (10.2% capacity increase).

• Operating Profit: Fell 49% to S$398 million, with an operating margin of 8.3%, down from 16.2%, due to a 20% rise in net fuel costs and 12.1% increase in non-fuel costs.

• Key Challenges:

  Air India Losses: The integration of Air India, following its merger with Vistara, incurred significant costs, dragging down profitability.

  Lower Interest Income: A decline in interest income further pressured the bottom line.

  Competitive Pressures: Passenger yields dropped 4.5% year-over-year due to increased competition in Asia, per Reuters.

Despite the profit slump, SIA’s revenue growth and operational strength in passenger and cargo segments highlight resilience, suggesting the miss may be a temporary setback.

Stock Performance: Testing the Lows

SIA’s stock (SGX:C6L) dropped 5% in premarket trading post-earnings, bringing it to around SGD 7, near its 52-week low of SGD 6.50. Key technicals:

• Support/Resistance: Support at SGD 6.50-SGD 7 (50-day moving average), resistance at SGD 8 (recent consolidation zone).

• RSI: At 30, indicating oversold conditions, suggesting a potential rebound if sentiment improves.

• Volume: Spiked 20% above average post-earnings, reflecting heightened selling pressure but also potential for bargain hunting.

The stock’s decline aligns with broader market caution, with the Straits Times Index (STI) at 3,800 points after a 14-day rally. However, SIA’s underperformance compared to the STI’s 8% YTD gain underscores sector-specific challenges.

Valuation at SGD 7: A Bargain or a Trap?

At SGD 7, SIA’s valuation appears attractive:

• Forward P/E: Approximately 10-11x, based on consensus 2025 EPS estimates of SGD 0.73, per Yahoo Finance. This is below SIA’s historical average of 15-18x and the airline industry’s 12-13x.

• Dividend Yield: Around 1.5%, offering income stability, per Investing.com.

• Price-to-Book (P/B): At 1.2x, below peers like Cathay Pacific (1.5x), suggesting undervaluation.

• Market Cap: Approximately S$20.8 billion, reflecting SIA’s scale as a leading global airline.

Compared to peers like Cathay Pacific (HKG:293, forward P/E ~14x) and Qantas (ASX:QAN, ~13x), SIA at SGD 7 offers value, especially given its strong balance sheet (net cash of S$10 billion) and operational resilience.

Long-Term Prospects: A Leader in the Skies

Despite the Q1 miss, SIA’s long-term fundamentals remain robust:

• Market Leadership: As Asia’s premier airline, SIA benefits from a strong brand and extensive network, serving 10.2 million passengers in Q3 FY2025, a quarterly record, per The Edge Singapore.

• Growth Catalysts:

  Travel Recovery: Robust demand in Asia, particularly North Asian markets like China and Japan, supports passenger growth (11% capacity increase in Q2).

  Cargo Strength: A 10.2% rise in cargo capacity and 20% increase in cargo loads bolster revenue diversification.

  Digital Transformation: Investments in AI-driven customer service and operational efficiency enhance competitiveness.

• Strategic Moves: The Air India-Vistara merger, despite near-term losses, positions SIA for long-term growth in India’s fast-growing aviation market. A one-off S$1.1 billion gain from the merger boosted Q3 FY2025 earnings to S$1.63 billion, per DBS.

• Sustainability: SIA’s focus on fuel-efficient aircraft and sustainable aviation fuel aligns with global trends, potentially reducing costs long-term.

Risks to Consider

• Air India Integration: Ongoing losses and integration costs could persist, impacting profitability.

• Fuel Costs: Rising oil prices ($75/barrel due to Israel-Iran tensions) and SIA’s oil hedging strategy limit savings, per Investing.com.

• Tariff Pressures: Trump’s tariffs (30% on EU/Mexico, 35% on Canada, effective August 1) could raise operational costs and dampen global travel demand, per Reuters.

• Competition: Lower passenger yields (down 4.5% YoY) due to increased capacity in Asia could pressure margins, per The Smart Investor.

Despite these risks, SIA’s diversified revenue streams, strong cash position, and focus on cost control position it for a recovery, particularly as global travel demand remains healthy.

Should You Buy Below SGD 7?

At SGD 7, SIA appears undervalued, with a forward P/E of 10-11x and a P/B of 1.2x, compared to its historical averages and industry peers. The stock’s oversold RSI (30) and proximity to support levels (SGD 6.50-SGD 7) suggest a potential rebound, especially if SIA addresses Air India’s losses and capitalizes on travel demand. However, short-term volatility is likely due to:

• Earnings Sentiment: The Q1 miss and cautious outlook could keep pressure on the stock.

• External Risks: Tariffs and geopolitical tensions (Israel-Iran conflict) may impact costs and demand.

• Market Volatility: A potential 7-10% S&P 500 pullback to 5,800-6,000, per Morgan Stanley, could drag SIA lower, given its correlation with global markets.

For long-term investors, SGD 7 or below offers a compelling entry point, with potential upside to SGD 8-SGD 8.50 by year-end if SIA stabilizes Air India and sustains revenue growth. Short-term traders should be cautious, using tight stop-losses to manage downside risks.

Analyst Sentiment

• Bullish Views: DBS maintains a Hold rating with a SGD 6.00 target, citing SIA’s operational strength but noting near-term challenges, per DBS.

• Bearish Concerns: JPMorgan downgraded SIA to Neutral from Overweight, lowering its target to SGD 7.00 from SGD 8.00, citing fuel cost pressures and Air India losses, per Investing.com.

• Consensus: The median price target is SGD 7.50, suggesting 7% upside from SGD 7, per TipRanks.

Social media sentiment on X is mixed, with users noting “SIA’s dip is a buy at SGD 7” but others warning of “Air India dragging it down further.”

Trading and Investment Strategies

Short-Term Plays

• Buy on Dip: Enter at SGD 6.50-SGD 7, target SGD 8, stop at SGD 6.20. A 14-23% gain if sentiment improves post-earnings.

• Options Straddle: Buy SGD 7 calls/puts for volatility around future earnings or Air India updates, targeting 200-300% gains if the stock moves 10%+.

• Sector Hedge: Buy CapitaLand Integrated Commercial Trust (SGX:C38U) at S$2.00, target S$2.20, stop at S$1.90, for REIT stability.

Long-Term Investments

• Hold SIA: Buy at SGD 6.50-SGD 7, target SGD 8.50-SGD 9 by 2026, for 21-29% upside with travel recovery.

• Diversify with REITs: Buy Keppel DC REIT (SGX:AJBU) at S$2.20, target S$2.46, stop at S$2.10, for 12% upside with data center growth.

• Hold OCBC: Buy at S$14.50, target S$15.50, stop at S$14, for 7% upside with banking stability.

• Global Exposure: Buy Tech ETF (XLK) at $200, target $220, stop at $190, for tech diversification.

Hedge Strategies

• VIXY ETF: Buy at $15, target $18, stop at $13, to hedge against tariff or market volatility.

• SPY ETF Puts: Use puts at $614 to protect against a 5-10% S&P 500 pullback.

• Gold ETF (GLD): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously optimistic about SIA, seeing SGD 6.50-SGD 7 as a compelling entry point for long-term investors given its undervaluation and travel demand strength. I’ll buy SIA at SGD 6.50-SGD 7, targeting SGD 8, with a SGD 6.20 stop, and use a SGD 7 call/put straddle for volatility. For diversification, I’ll add Keppel DC REIT at S$2.20, targeting S$2.46, with a S$2.10 stop. I’m hedging with VIXY at $15, targeting $18, and keeping 20% cash to seize dips if tariffs, geopolitical tensions, or Air India challenges escalate. I’ll monitor Air India integration updates, fuel cost trends, and global travel demand for cues.

Key Metrics

The Bigger Picture

SIA’s 59% profit plunge to S$186 million in Q1 2025, driven by Air India losses and lower interest income, has pushed its stock to SGD 7, a level that appears undervalued with a forward P/E of 10-11x. Despite the miss, robust travel and cargo demand, coupled with SIA’s strong balance sheet and market leadership, suggest a temporary setback. Risks like Air India integration, rising fuel costs, and tariff pressures (30% on EU/Mexico, 35% on Canada) could cap near-term upside, but the long-term outlook remains bullish. Investors should buy on dips below SGD 7 for value, diversify with REITs or banking stocks, and hedge with VIXY or GLD to manage volatility. SIA’s dip could be a runway for gains—play it smart to soar.

Would you buy SIA at SGD 7, or are you waiting for a deeper dip? Share your strategy below! 🎁

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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