SIA share price in explosive destiny

My last article on SIA share price was on 22 May 2020. Back then, there were plenty of uncertainties for SIA share price due to the devastating COVID-19 pandemic and the massive $8.8 billion rights issue. In view of these circumstances, I felt that it would be unfair to judge the performance of SIA share price. Now that things had pretty settled down, I think it is time opportune to provide an update on the outlook for SIA share price.

In the blink of an eye, it has been one year since the initial pandemic outbreak. The world is still struggling with multiple waves of COVID-19 infections and travel restrictions are still imposed strictly across most countries. But in November 2020, the sudden announcement of vaccine ignited plenty of hope of recovery for the travel industry, causing SIA share price to jump from $3.40 to the current $5.60. Has SIA share price really bottomed out?

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SIA share price to rock or melt with Special Share?

I have always maintained that our government will fight to the very end for SIA share price. In 2020, the narrative was all about ensuring liquidity of SIA and preserving the value of SIA share price. Being a key economic driver, it would be disastrous if SIA falls into the abyss or into the hands of foreign entities. After all, the aviation industry employs more than 375,000 people and SIA is one of the biggest employers in the sector. Due to this reason, Ministry of Finance holds one Special Share in SIA.

The last time that SIA invoked the Special Share was during the SARS period (2003). This time round, SIA did not seek a bailout from the government, presumably the management is confident that the rights issue and the mandatory convertible bonds will be sufficient for the carrier to ride out the storm. Then again, Man proposes, God disposes. The only predictability of SIA share price is its unpredictability. Two major events will shape the form of SIA share price in the coming months and investors should brace for more volatility of SIA share price ahead.

Passenger capacity is expected to reach 25% of pre-COVID by April 2021. On the other hand, 3rd quarter losses narrowed down to $142 million versus the colossus $2.34 billion losses sustained in 2nd quarter. If SIA can sustain such performances in the coming months, there is a chance that SIA share price could recover to the $7 to $8 bandwidth by the end of the year. Evidently, there is much pent-up demand for leisure travels and the management should be gearing up for the festive season in 2021.

The first litmus test for SIA share price should come in May 2021 when the carrier announces its full-year financial result. I expect full-year losses to be $3.5 billion. While the record loss is expected to rattle investors and shake confidence in SIA share price, the market should have factored in this downside risk already. In other words, most investors would have anticipated that the airline would be making significant losses for FY2020/21 due to pandemic. In this regard, I expect the correction to be limited.

The major headwind for SIA share price should be the potential issuance of the $6.2 billion mandatory convertible bonds in July 2021, which will be highly dilutive to SIA share price.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in SIA before. Whether SIA share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

SIA share price faces destiny

There are several key factors that could shape the performance of the SIA share price in the months ahead. In terms of business fundamentals, things are [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: May 14, 2021 — 10:11 pm

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