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4 Stocks This Week (Air Travel) [3 Nov 2017] – SIA, SIAEC, SATS, ST Eng

As we celebrate the opening of Changi Airport Terminal 4, let’s look at some of the companies involved in air travel and associated segments.

Earnings report season is underway, and we can expect the weeks to come would be a busy period for analysts and investors.

On October 31,  Changi Airport’s Terminal 4 officially opened. For a start, Terminal 4 will be hosting nine airlines. The opening of Terminal 4 continues to add to Changi Airport’s annual passenger handling capacity, bringing its current total to 82 million passengers annually.

The opening is timely, giving year-end travellers, especially families, the opportunity to experience first-hand Singapore’s newest and highest-tech passenger terminal.

Let’s look at 4 stocks this week whose company’s core business is related to the air travel and logistics.

Read Also: What Does An Improved GDP Mean For Singaporeans In 2018

Singapore Airlines Limited (SGX: C6L)

Singapore Airlines Limited (SIA) is an iconic Singapore brand globally. Together with its subsidiaries, SIA provides passenger and cargo air transportation services all around the world, including in Asia, the Americas, Europe and Africa. Its subsidiaries include SilkAir, Scoot and Tigerair.

As fuel costs account for more than one third of SIA’s operating costs, the current bear market for oil prices continues to have a positive impact on SIA’s earnings, especially after additional cost-cutting measures were implemented. With current oil prices stabilising, this may have an impact on future earnings.

As of March 31, 2017, its operating fleet consisted of 178 aircraft, which included 171 passenger aircraft and 7 freighters. Significantly, the company also concluded a $19 billion renewal of its fleet, witnessed during PM Lee Hsien Loong’s recent visit to the USA, and President Donald Trump.

SIA is a subsidiary of Temasek Holdings, which owns 55.59%. This week, ending 3 November, SIA’s stock price closed at $10.28.

Read Also: Short-Term Turbulence Ahead: Here’s Why Singapore Airlines Can Remain A Part Of Your Portfolio

SIA Engineering Company Limited (SGX: S59)

SIA Engineering Company Limited (SIAEC), together with its subsidiaries, operates as an aircraft maintenance, repair, and overhaul company in East Asia, West Asia, Europe, South West Pacific, Americas, and Africa.

On November 3, SIAEC announced earnings results for the Q2 and 6 months ended September 30, 2017.

For the quarter, the company reported revenue was $274.7 million, up from $264.8 million a year ago. Operating profit was $19.5 million against $24.5 million a year ago.

For the six months, SIAEC reported revenues of $547.5 million, versus S$36.4 million a year ago. Profit for the period was $74.6 million against $236.6 million a year ago.

Earlier in October, SIAEC’s shares plunged to a 6-year low after rumors of JP Morgan’s 38.9 million shares being offered at a large discount. Though rumors turned out to be unfounded, the share price hasn’t made much of a recovery. SIAEC’s share price closed at $3.26 this week.

SATS Ltd. (SGX: S58)

SATS Ltd. is an investment holding company that provides gateway services and food solutions in Singapore, Japan, and internationally. It also operates the Marina Bay Cruise Centre in Singapore.

SATS has operations at 47 airports in 14 countries, employing more than 13,000 people.

Temasek Holdings is the majority shareholder, owning 39.86% of SATS Ltd., which closed at $4.77 this week.

Singapore Technologies Engineering Ltd (SGX: S63)

Singapore Technologies Engineering Ltd (ST Engineering) provides engineering and related services worldwide in four segments of Aerospace, Electronics, Land Systems, and Marine. In particular, the Aerospace segment provides maintenance and engineering services, including airframe and engine overhaul services, engineering design and technical services; and pilot training services.

Recently, on October 23, its aerospace arm, ST Aerospace secured new contracts worth about S$530m  for heavy airframe and engine maintenance, component repair and overhaul and cabin retrofitting. This will be counted in its 3Q2017 revenue, which Singapore Technologies Engineering Ltd is scheduled to report on November 8.

Singapore Technologies Engineering Ltd is a subsidiary of Temasek Holdings (Private) Limited. It closed at $3.47 this week.

The Sky’s The Limit

The Singapore government is investing heavily into building up the air travel and logistics sector in Singapore, including the opening of Project Jewel in 2019, as well as the colossal Terminal 5, which is planned to be ready in the 2020s. Assuming projections hold, the increase in passenger and air freight traffic will see a corresponding increase in the demand for auxiliary airline, maintenance and terminal services.

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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.