July 29, 2011
Analysts cut their target prices and recommendations on Singapore Airlines after the carrier posted an 82 percent drop in first quarter profit due to high jet fuel prices.
Bank of America Merrill Lynch, which called the weaker-than-expected results "dreadful," cut its price target to SGD$14.20 (USD$11.78) from SGD$16.60, but maintained its "buy" recommendation of the stock.
Credit Suisse downgraded its recommendation on the stock to "neutral" from "overweight" with a lower target price of SGD$14.40 compared to SGD$15.90 previously, while Deutsche Bank cut the stock to "hold" from "buy" and reduced the target price to SGD$13.20 from SGD$16.90.
"The weak result gives renewed urgency to the new CEO's initiatives of a long-haul budget carrier and tie-up with Virgin Blue. SIA needs more traffic for its network (and) these should give it," Bank of America Merrill Lynch said in a research report.
"Change is needed as the rapidly changing Asian aviation market means SIA's premium-only strategy appears to be faltering," the report said.
The carrier, about 55 percent-owned by Singapore state investor Temasek, posted a net profit of SGD$44.7 million (USD$37 million) in the quarter ended June 30, compared to SGD$252.5 million a year ago.