Kim Eng sees Singapore Air load factor bottoming

Maybank Kim Eng said latest monthly data from Singapore Airlines Ltd (SIA) indicated that load factors might have bottomed, although stubbornly high fuel prices would hurt the company's earnings.

"On balance, the ongoing operating data shows that both passenger and cargo load factors seem to be bottoming out, which supports our view for a recovery. However, this is not expected to lead an earnings recovery until an anticipated inflection point from fiscal year March 2014 onwards," the broker said.

It maintained its buy rating on SIA and a target price of S$14.40 versus Tuesday's price of S$10.96. Kim Eng is among five brokers with a buy or strong buy rating out of 23 analysts covering the stock.

Kim Eng said high jet fuel prices were still a major drag on SIA's earnings. "While we do not anticipate a further sharp spike, the current price level still poses a significant threat to profitability," it said.

It cut SIA's earnings forecast by 25 per cent for the year ending March 2013 after raising its estimate for jet fuel prices to $135 a barrel from $128.