SIA posts highest profit in 76-year history. Blue skies ahead?



By Beansprout • 17 May 2023 • 0 min read

Singapore Airlines (SIA) just reported the highest level of profit in the company’s 76-year history. We analyse what this would mean for the company's stock price.

Singapore Airlines SIA record profit
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What happened?

Singapore Airlines (SIA) reported a net profit of S$2.2 billion for the fiscal year ending 31 March 2023, the highest level in the company’s 76-year history.  

What does this mean?

#1 – Singapore Airlines has been carrying more passengers

With the recovery in travel demand, SIA and Scoot carried 26.5 million passengers in the year. 

That is six-times higher than the number of passengers it carried for the 12 months ending March 2022.

As a result, the passenger capacity of the SIA group reached 79% of the pre-Covid levels in March 2023.

Looking ahead, SIA continues to see “robust” demand for air travel. Sales for flights in the coming months “remain healthy” across all cabin classes, driven by a strong increase in bookings in China, Japan and South Korea. 

Earlier, the company also announced that it carried 1.75 million passengers in April, an increase of 53% compared to the previous year. 

Source: Singapore Airlines

#2 – Increase in dividends paid out

With the higher profit, Singapore Airlines announced a final dividend of S$0.28 per share.

Together with an interim dividend of S$0.10, this would bring the total dividend in the fiscal year to S$0.38.

Based on the company’s share price of S$5.92 at the market close on 16 May, this would imply a dividend yield of 6.4%. 

SIA’s improved balance sheet has also enabled the company to increase the dividend payout, with a debt-to-equity ratio of 0.77x as at 31 March 2023. 

Even after adjusting for the company’s plans to redeem 50% of the tranche of Mandatory Convertible Bonds (MCB) issued in 2021, SIA’s debt to equity ratio remains below 1x. 

Source: Singapore Airlines

#3 – Cargo business has weakened further 

One area of weakness in Singapore Airlines’ results lies in its cargo business.

Demand for air freight declined with slower global economic growth. At the same time, there were more passenger flights which provided additional capacity to carry cargo. 

As a result, Singapore Airlines’ cargo flown revenue fell to S$3.6 billion in the latest fiscal year, a 17% decline compared to the previous year. 

Source: Singapore Airlines


What would Beansprout do?

Singapore Airlines has been ahead of other airlines in adding flight capacity back into the market following the re-opening of borders, allowing the company to leverage on the increase in global travel demand. 

Despite its record profit, the stock currently trades at 0.9x Price-to-book, below its historical average. 

Source: Stratosphere


SIA’s latest results demonstrate that there is indeed pent-up demand for travel, and this could continue for the next few quarters. 

This is a positive for other travel-related stocks and hospitality REITs. However, SATS could see a larger drag from the weakness in cargo business after its acquisition of Worldwide Flight Services. 

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