[SINGAPORE] UOB Kay Hian (UOBKH) has downgraded Singapore Airlines (SIA) to a “sell” after a re-escalation in Middle East tensions on Monday (Sep 14) sent jet fuel prices rising.
Drone attacks on Monday by the Iran-backed Houthis knocked out a key Saudi Arabia pipeline bypassing the closed Strait of Hormuz, while planned talks between Gulf Arab states and Iran were postponed.
Brent and US crude oil prices were respectively at about US$105 and US$101 a barrel on Friday. Jet fuel rose to US$190 a barrel as at Tuesday, nearing the highs of US$200 a barrel in April, and about 58 per cent higher than the US$120 a barrel price in late June.
In response, UOBKH slashed the 2027 and 2028 earnings forecasts for SIA by 21 per cent to S$831 million and by 5 per cent to S$961 million, respectively. The stock’s price target was reduced to S$6.16, from a previous target of S$6.71.
The brokerage also cut SIA’s net profit guidance for the second quarter of the 2027 financial year to between S$230 million and S$370 million, from between S$240 million and S$460 million.
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