Singapore Airlines down 1%; near-term challenges: CIMB

Singapore Airlines is down 1% at $10.48, leaving the stock with a marginal around 2.9% year-to-date rise vs the STI’s 14.5% advance year-to-date.

While SIA’s 2Q13 core net profit was “decent” on sound cost control and lower effective tax rates, “fiscal-1H13 core profit was below expectations at just 37% of our full-year estimate,” says CIMB in a report.

It says 2Q13 revenue trends were disappointing, growing just 3% on-year, while cargo performance was equally disappointing. It lowers its FY12-14 core EPS forecasts by 2%-9% on continued cargo weakness and higher jet fuel assumptions.

“Although SIA has attempted to stave off competition from the low-cost carriers and the Middle Eastern airlines via the development of SilkAir and the broadening of its alliance network, we think these actions will not have an immediate impact on profitability. As such, we see further near-term challenges.”

It keeps a Neutral call with $11.00 target. Orderbook quotes suggest the stock isn’t likely to retest the $10.40 intraday low.