Singapore Airlines Earnings: We Are Not Disappointed; Raising Fair Value Estimate 12% to SGD 8.60

No-moat Singapore Airlines' share price reacted negatively after December-quarter performance missed market consensus estimates. In contrast, we were positively surprised as we had factored in higher costs. Our profit forecasts assume that proportionate costs will normalize to be in line with the long-term average. So, while operating margin fell in the December quarter to 12% from 17% in the June quarter, it is comfortably above our prior assumption for fiscal March 2024. We now forecast operating margin of 12.9% in fiscal 2024 and 9.5% in fiscal 2025, both up from 10.7% and 4.3%, respectively. Our fair value estimate rises to SGD 8.60 from SGD 7.70. Following the fall in share price, we believe SIA is attractive.