DBS Group Research has downgraded Singapore Airlines (SIA) to “fully valued” with a target price of $3.60 that’s based on 0.9 times FY2022 price-to-book (P/BV).
The target price represents -1 standard deviation (s.d.) of the stock’s five year mean P/BV. The price also takes into consideration that the mandatory convertible bonds (MCBs) from the airline are debt instead of equity as the brokerage sees SIA redeeming the MCBs within 10 years.
SIA’s share price has increased by 25% in the last month due to optimism that international air travel may return soon amid the positive vaccine development news. That said, at over 1 times FY2022 P/B with losses “likely to continue in the next 12 months”, the airline’s valuations are now “over-extended”, says the team.
