4 Singapore Aviation and Tourism Stocks That Could See a Better 2024

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2023 has been a mixed year for the aviation and tourism industry.

On one hand, air travel has witnessed a surge in demand as economies reopened.

This pent-up demand resulted in “revenge spending” where people willingly opened their wallets after being cooped up for more than two years.

On the other hand, high inflation has been a headwind for consumer spending and has also increased expenses for aviation and tourism businesses.

Luckily, core inflation in Singapore appears to be trending down with the latest reading at 3.3% for October, significantly lower than the 5.5% registered in January.

We highlight four stocks within these industries that could see a better 2024.

Singapore Airlines Limited (SGX: C6L)

Singapore Airlines Limited, or SIA, is Singapore’s flagship airline.

The blue-chip carrier reported a strong set of results for its fiscal 2024 first half (1H FY2024) ending 30 September 2023.

Total revenue rose 8.9% year on year to S$9.2 billion with operating profit jumping nearly 26% year on year to S$1.6 billion.

Net profit hit a record S$1.4 billion for 1H FY2024, up 55.4% year on year.

SIA also declared an interim dividend of S$0.10, similar to what was paid out a year ago.

There could be more in store for investors in the second half of FY2024 and FY2025.

The group has 96 aircraft on order and looks set to continually refresh its fleet, helping to maintain its reputation as one of the youngest and most fuel-efficient fleets in the industry.

The Singapore Tourism Board expects the sector to recover to pre-pandemic levels next year, which should see a further boost to the number of travellers, thereby benefitting SIA.

SIA’s capacity is slated to reach an average of around 92% by December 2023 and is poised to return to pre-COVID levels by FY2025.

The group has another catalyst in its multi-hub strategy where it merged with Vistara to increase its presence in key Indian airline market segments.

Elsewhere, SIA is also working to increase its codeshare agreements with other airlines to increase its network and cover more routes.

Straco Corporation Limited (SGX: S85)

Straco is an operator of tourism facilities and owns two aquariums in China – the Shanghai Ocean Aquarium (SOA) and Underwater World Xiamen (UWX).

In Singapore, the group owns the iconic Singapore Flyer.

Straco had to endure frequent closures for its China attractions over the last three years due to pandemic-related restrictions, resulting in the group booking a net loss for 2022.

The tourism operator just released its business update for 2023’s third quarter (3Q 2023).

Revenue more than tripled year on year to S$35.5 million as crowds returned to Straco’s attractions during China’s summer holidays.

Net profit soared from just S$175,000 in 3Q 2022 to S$16.3 million in the current quarter.

With full reopening in China and Singapore, investors can expect to see stronger numbers for 2024 as more tourists are expected to visit both countries.

SIA Engineering Company (SGX: S59)

SIA Engineering Company, or SIAEC, is a maintenance, repair and overhaul (MRO) specialist for airlines that also offers line maintenance services.

For 1H FY2024, SIAEC saw revenue jump 42% year on year to S$514 million.

The group’s share of profits from associates and joint ventures increased by 20.8% year on year with the aviation recovery.

As a result, net profit for the MRO specialist surged by 82.6% year on year to S$59.3 million.

An interim dividend of S$0.02 was also declared.

For its Line Maintenance division, SIAEC saw flight recovery at 89% of pre-pandemic levels, up 10 percentage points from a year ago.

With SIA projecting a full recovery by FY2025, SIA should also see its fortunes increase in tandem.

The group is gearing up for more growth with the establishment of regional hangars and the setting up of component capabilities in lower-cost countries.

Meanwhile, SIAEC will also deepen its collaboration with SIA to secure original equipment manufacturing (OEM) partnership capabilities and strengthen its sales and marketing team to acquire more long-term customers.

SATS Ltd (SGX: S58)

SATS provides gateway services to airlines and food solutions to airlines, restaurant chains, retailers, and institutions.

The group reported a robust set of earnings for 1H FY2024 and saw its revenue tripling year on year with the consolidation of its Worldwide Flight Services (WFS) acquisition.

Core net loss, however, came in at S$600,000 although this was a sharp improvement from the net loss of S$15.8 million in the prior year.

SATS is gearing up to manage higher cargo volumes and has added a new cargo terminal at Chicago O’Hare International Airport while investing in a fifth cargo terminal in Madrid.

Its recent collaboration with Kuehne+Nagel looks set to drive value chain improvement for air logistics customers.

The integration of SATS and WFS is also progressing well and more contributions should come in for 2H FY2024 and FY2025.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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