Singaporeans’ great love for travelling is a well-known fact with a recent study done earlier this year showing that Singaporeans took an average of 5.2 trips in the last twelve months.
As we fuel our desire to travel and discover the hidden gems of Mother Earth, let’s also take a look at the latest developments in the aviation industry to see if there are any other treasures that investors can profit from.
Below, we will be examining the current performance of three companies that are in the aviation industry.
1. ST Engineering (STE)
Analysts at UOB Kay Hian Research (UOBKH) are expecting STE to report a net profit hike of at least 50% for the third quarters (year-on-year basis).
The anticipated increase is partly due to a lower quarter on quarter provision for the shipbuilding division which suffered a $22 million loss previously in the second quarter of 2017.
Further defence-related ship repair contracts may also be in the pipeline given the recent conclusion of a Singapore-US agreement for SIA to purchase $19 billion worth of Boeing aircraft.
That will be beneficial for STE if ST Marine’s wholly-owned US subsidiary VT Halter Marine can successfully win these contracts.
Also, should the proposed tax cuts by President Trump do get implemented, STE will benefit from a lower tax charge.
Overall, these developments have led to Singapore Technologies Engineering Limited (SGX: S63) being upgraded by UOBKH to a “Buy” with a target price of $3.80 (unchanged).
Including expected divestment gains, SATS is expected to report a 24% increase in net profit year on year to $77 million for the second quarter of 2017.
However, core net profit is foreseen to remain constant at $65 million.
The divestment gains are likely to come from the partial disposal of SATS HK (ramp and pax handling), and Asia Freight Terminal (cargo handling), estimated to be worth $12 million.
The partial sale of SATS HK is likely to change operating margins favourably and lower labour costs.
With higher flights and cargo coming through Changi, Singapore gateway services revenue should increase by at least 5.0% this quarter.
Overall UOBKH has set a “Buy” call on SATS Limited (SGX: S58) with a target price of $5.40.
Assuming a 1 cent decline in pax yield, SIA is likely to report $121 million worth of net profit for 2QFY18.
Currently, SIA still competes in a very competitive market where competitors like Norwegian Air and Qantas may potentially be changing the status quo shortly.
The primary earnings driver is expected to be the improved load factor, but pax yields are likely to remain flat for 2QFY18.
Overall, there is a lack of exciting profit driver to give SIA’s earnings a much-needed boost.
Therefore, Singapore Airlines Limited (SGX: C6L) has been given a “Hold” call, and a target price of $10.10 and all eyes are on the reported earnings to see if analysts’ expectations have been met.
Investors who are looking for some extra money to fund their travelling urge should definitely keep an eye on the latest developments for these stocks.