OCBC Investment Research has maintained its ”underweight” recommendation on the aviation sector as headwinds persist hitting airlines with overcapacity and aviation maintenance service providers with fewer workshop visits.
Airlines are suffering from overcapacity in the region while global economic growth remains moderate. Singapore Airlines, in particular, is being hit by the aggressive expansion of Gulf carriers and Lion Group, which has become the second largest carrier after SIA on the Singapore-Jakarta route by capacity.
“We believe SIA’s 1QFY16 weak set of results have already started to reflect the intensifying competition, which will only become tougher over time,” OCBC says.
Meanwhile, a full turnaround is not in sight for Tiger Airways given the uncertain air travel market and time needed to implement synergies between Scoot and Tigerair.
The aviation maintenance services providers, on their part, are affected by increased maintenance cycles brought about by newer and better aircraft and engine designs and the phasing out of older engines.
Of the lot, SATS has shown the most resilience as a result of disciplined cost management, productivity gains and better business mix which translate to a stable dividend payout. SATS’s growth is underpinned by plans to make acquisitions for overseas growth.
OCBC has “hold” rankings on SIA, ST Engineering and SATS and “sell” recommendations on Tigerair and SIA Engineering Company.
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Airlines are suffering from overcapacity in the region while global economic growth remains moderate. Singapore Airlines, in particular, is being hit by the aggressive expansion of Gulf carriers and Lion Group, which has become the second largest carrier after SIA on the Singapore-Jakarta route by capacity.
“We believe SIA’s 1QFY16 weak set of results have already started to reflect the intensifying competition, which will only become tougher over time,” OCBC says.
Meanwhile, a full turnaround is not in sight for Tiger Airways given the uncertain air travel market and time needed to implement synergies between Scoot and Tigerair.
The aviation maintenance services providers, on their part, are affected by increased maintenance cycles brought about by newer and better aircraft and engine designs and the phasing out of older engines.
Of the lot, SATS has shown the most resilience as a result of disciplined cost management, productivity gains and better business mix which translate to a stable dividend payout. SATS’s growth is underpinned by plans to make acquisitions for overseas growth.
OCBC has “hold” rankings on SIA, ST Engineering and SATS and “sell” recommendations on Tigerair and SIA Engineering Company.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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