Singapore (Thomson Financial) - Shares in Singapore Airlines (SIA) were higher Monday after it reported forecast-beating results for its third quarter to December, reflecting continuing strong demand for air travel.
On Friday, the airline said its third-quarter net profit was 590 million dollars, little changed from 589.2 million dollars a year before in the absence of exceptional gains.
Excluding last year's one-off gain of 198 million dollars from the sale of 35.5 percent of Singapore Aircraft Leasing Enterprise, net profit actually rose 50.7 percent on robust travel demand, SIA said.
The net profit surpassed analyst expectations. Those polled by Thomson Financial had estimated a net profit of 488-549 million dollars.
Following the third-quarter results Kim Eng Securities has lifted its net profit estimate for SIA for the year to March by 12 percent to 2.13 billion dollars.
"Despite limited capacity increase through the delivery delays of the Airbus A380, SIA was still able to keep loads high and ticket prices at a premium. We would attribute the majority of the higher yields to higher ticket prices and fuel surcharges," said Kim Eng.
Kim Eng rates SIA a "buy", with a target price of 22.80 dollars per share.
Rising fuel costs and softening travel demand will be a drag on earnings in future, Kim Eng said. It is expecting SIA's net profit to ease to 1.74 billion dollars in the year to March 2009.
DBS Vickers Securities is expecting SIA's net profit to ease to 1.82 billion dollars in this financial year in the absence of exceptional gains. It is expecting net profit to rise to 2.06 billion dollars in the next financial year.
"Whilst there may be some worry over a slowing US affecting overall air travel demand in the near term, we remain confident over the SIA's long-term prospects and management's ability to guide the group through any difficult period," DBS Vickers analyst Paul Yong said in a note to clients.
"We also believe that SIA's high-yield, high-load-factor business model should help ensure the group remains profitable, even with weaker demand," Yong said.
DBS Vickers rates SIA a "buy", with a target price of 24.00 dollars a share.