SIA Engg has been recovering slowly after hitting a low of about 4.90 last week on market sell down. Has just broken above the 20 DAY MA line 4 days ago and still staying above it consistently and forming higher highs each day. Immediate resistance to watch would be 5.10 critically, a break above 5.10 can see it go higher to 5.30 which was the high in May last month before markets sold down. A good stock to accumulate on dips to ride any potential rebound.
Stop loss below 4.95.
Maybank KE – 27TH June 2013
Singapore Transportation Update: What If The Haze Returns?
Ø The haze impact will not last long. We stay positive on SIAEC (BUY, TP: SGD6.16), SATS (BUY, TP: SGD3.90) and ComfortDelGro (BUY, TP: SGD2.33) and believe that any negative reaction presents opportunities to accumulate undervalued transportation sector stocks that we favour.
Ø SIA, SIAEC & SMRT most exposed. We estimate that SMRT and ComfortDelGro would suffer a weekly earnings impact of SGD2m and SGD1.4m or 2.0% and 0.5% of annual profit respectively for every 15% reduction in fare revenue. SIA and SIAEC would be exposed as Singapore is their main operating base, but it is not possible to assess the earnings impact on aviation stocks as there are too many moving parts. Inbound traffic could be hit, but this could be offset by more outbound traffic.
Ø Historically, no impact on stocks as long as haze lasts less than a month. We observed no material adverse reaction during the worst of the haze in Sep 1997 and Oct 2006, which generally lasted about a month. As long as the haze does not last for more than a month this time round too, we remain sanguine on the situation. Using a far worse example to gauge downside, the SARS epidemic impacted the aviation stocks by almost 20% at the worst, but land transport stocks were unscathed.
