$SIA (C6L.SG)$ UOB KH have downgraded it to "sell" with a hi...

UOB KH have downgraded it to "sell" with a higher tp of 7.07 from 5.75 previously.

UOB KH note that its valuation is "very lofty" with its FY2024 P/B of 1.58x and 2.8 standard deviations (s.d.) above its historical mean. At its current share price levels, SIA's valuation now matches its historical peak just before the global financial crisis (GFC) and is unlikely to be sustainable in the long run given UOB KH's core ROE estimates of 12.1%, 8.5% and 7.0% for the FY2024, FY2025 and FY2026 respectively.

UOB KH note that there were 2 legs. The first took place between May 17 to 22, immediately after SIA's FY2023 results and driven by the positive surprise of a strong dividend. The second leg of uprun began on Jun1, which coincided with the sharp share price decline of the 3 major Chinese Airlines.

"[The share price decline was] triggered by China Southern Airlines' (CSA) surprising announcement (on May 31) of raising up to 25.6% of new shares, which has underlined major risks of more EPS-dilutive equity raisings by the 3 major Chinese airlines," said UOB KH.