SIA reported June operating numbers after market close. The numbers are encouraging, with passenger traffic rising +9% MoM (and falling less YoY) and load factors picking up for both passenger and cargo. We think this indicates that the global recession and concerns on H1N1 flu could be receding. The June MoM passenger traffic improvement is also better than that of Cathay Pacific, which still reported 6% MoM decline.

On the negative side, MoM cargo traffic fell again slightly. In terms of yield development, Taiwanese airlines, the only in the region reporting monthly yields, showed signs of rate stabilisation in April and May.

We have raised our target price on higher share prices for SATS share to be distributed. Our new target price of S$15.64 (S$15.07 previously) is a sum of S$14.0 (1.17x forward P/B) and S$1.64 (0.73 SATS at current share price per SIA share). Our target P/B (unchanged) is the mid-point between the historical average and one standard deviation below.