3Q09 core net profit was 25% below our expectation and 6.5% below consensus. The key variance was the average incurred price of US$124/barrel for jet fuel, against our expectation of US$102. However, as spot fuel costs continue to decline in 4Q and with passenger yields holding up better than expected, full-year earnings may still come within our forecast, which we are leaving unchanged for now. No dividend was declared, as expected.
For 4Q, SIA has hedged 44% of its jet requirements (3.7m barrels) at US$131/barrel, suggesting it will not be able to take full advantage of low spot prices. However, as these hedges expire, its average fuel cost should move closer to spot costs.
Source: CIMB, 11 Feb 2009
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