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Is Singapore Airlines Ltd A Bargain Now?

David Kuo

Singapore Airlines Ltd (SGX: C6L) is Singapore’s national carrier. It is famous around the world for its ‘Singapore Girl’ branding.

Other than the namesake carrier which the airline runs, it also has other subsidiaries such as SilkAir, Scoot, and Vistara that serve different groups of customers in the area of passenger transportation.

Between 1 Jan and 31 Dec 2018, Singapore Airline’s total return, which includes reinvested dividends has underperformed the Straits Times Index (SGX: ^STI). Its shares fell 8.2% compared to the STI’s drop of 6.5%.

Has Singapore Airline’s share disappointing share-price performance in 2018 made it a bargain now?

Four metrics, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and net debt-to-equity ratio might provide the answer.

The airline recorded a trailing twelve months (TTM) earnings per share of S$ 0.39. With its current share price at S$9.71, the P/E ratio is 29. Over the past four years (FY2014-FY2017, Singapore Airlines fiscal year ends in March), its P/E ratio has ranged from 14.36 to 38.06, which means that its current P/E, is comfortably in the range.

At the end of the September quarter of 2018, Singapore Airline’s reported a Net Asset Value of S$11.87. This results in a P/B ratio of 0.82 at current prices. Its P/B ratio over the past four years has ranged from 1.12 to 0.9, indicating that on a P/B basis the company is attractively valued.

For the quarter ending September 2018, Singapore Airline had a net debt of S$2.3 billion, while total equity stood at S$14.4billion. Dividing the net debt figure by the total equity thus gives us a ratio of 0.16, implying that Singapore Airline’s debt is 16% of its total equity.

Lastly, the airline’s dividend has increase slightly over the last four years, moving from S$0.22 in FY2014 to S$0.40 in FY2017. Assuming the company pays out the same dividend as 2017, the yield would be 4.1% at current prices.

Looking at the four metrics, it appears that Singapore Airlines is attractively prices based on all four metrics. But the analysis presented above should only serve as a starting point for further investigation.

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The Motley Fool Singapore writer Esjay contributed towards this article. Esjay does not own shares in Singapore Airlines.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn't own shares in any companies mentioned.