SINGAPORE (Dec 16): SIA is kept at “hold” by UOB KayHian but with a raised target price of $12 from $11, following the flag carrier’s fifth sequential monthly improvement in load factor, which the brokerage believes can be attributed to better code sharing arrangements.

“Unless yield deteriorates further, we believe Q3 earnings could surprise to the upside, especially with Scoot’s (SIA’s medium haul budget subsidiary) strong traffic growth,” states the brokerage in a Dec 16 note. For November, Scoot improved its traffic by 47%, and load factor by 2.7 points. UOB KayHian attributes the improvement from new routes to Osaka, Kaohsiung and Hangzhou.

UOB KayHian sees the better operational numbers possibly helping Scoot turn profitable again. In 2QFY16, Scoot reported an operating loss of $2 million on load factor of 84.5%. For Oct-Nov 15, Scoot registered a passenger load factor of 84.3%. “This, coupled with lower fuel cost and better operating efficiency on its nine B787 Dreamliners should swing Scoot to the black in 3QFY16 and potentially in 4Q as well,” states the brokerage.

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