Singapore Airlines shares jumped 4.71 percent to S$11.12 by 10:35 A.M. SGT after it reported earnings.
The carrier reported on Tuesday that its fiscal third-quarter net profit rose 61.6 percent on-year to S$286 million, boosted in part by the absence of the S$79 million Tigerair brand write down last year. For the nine-month April-to-December period, group net profit was up 42.5 percent at S$711 million.
Nomura said in a note on Wednesday that the October-to-December period were the highest quarterly earnings for three years and that the nine-month figures came in at 142 percent of its full-year forecast, albeit in line with consensus at 80 percent of the fiscal 2018 expectations.
Nomura said the better-than-expected third quarter was due to stronger-than-expected load factors and passenger yields, a solid cargo performance and lower-than-expected depreciation costs.
The market clearly approved of the results.
But the bank kept its Neutral call and S$10.62 target price unchanged, pointing to a challenging landscape.
It cited risks from rising fuel prices and continued pressure on passenger yields amid tough competition.
Those concerns echoed Singapore Airlines’ earnings report. The carrier said that pressure on yields was persistent as competitors “mount significant capacity in key markets with aggressive pricing.”
The carrier also pointed to rising fuel prices, but noted that for the fourth quarter, it had hedged nearly 41 percent of its needs at a weighted average jet fuel price of US$65 a barrel.
Nomura said its top Southeast Asian airline pick was still AirAsia on cheaper valuations and the potential for a special dividend.