SIA

SIA: As a read-through for Cathay Pacific's comments over the weekend on Sales fallings short of its expectations after promotional discounts have been introduced, together with Qantas' 28% fare discounts to HK during the holiday season, SIA likely faces a similar situation on its passenger volumes. Premium carriers like Cathay Pacific & SIA have a stronger correlation to the robustness of the Financial sector, because the bulk of the premium passengers, which contributes half of the Company's profits despite only being 10-15% of the total capacity, lie within the Financial sector. The Financial sector continues to be in a decline since 2009. Passenger yields have dropped 30% from 2011 following Wall Street's cost cuts/ dismissals, removing 300,000 financial jobs in the past two years. Recently Citigroup and Morgan Stanley announced a combined 12,600 job cuts in Jan 2013. Street estimates a 1.0x 2013 P/B with a TP of $11.41.