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Singapore Airlines Ltd Is Trading Close To Its 52-Week Low Price: Is It Cheap Now?

Lawrence Nga

Singapore Airlines Ltd (SGX: C6L), or SIA, is the national airline of Singapore. Aside from its traditional airline business, it also owns other brands like SilkAir and Scoot. SIA also has a subsidiary, SIA Engineering Company Ltd(SGX: S59), that specialises in aircraft maintenance, repair, and overhaul (MRO) services.

At the current price of S$9.82 (at the time of writing), Singapore Airlines’ shares are just 3% higher than the 52-week intraday low price of S$9.49. This raises a question: Is Singapore Airlines cheap now? This question is important because if the firm’s shares are cheap, it might be a good opportunity for investors.

Unfortunately, there is no easy answer. However, we can still get some insight by comparing Singapore Airlines’ current valuations with the market’s valuation. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.

I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).

Singapore Airlines currently has a PB ratio of 0.8, which is lower than the SPDR STI ETF’s PB ratio of 1.1. In addition, the airline’s dividend yield of 4.1% is higher than the market’s yield of 3.5%. The higher a stock’s yield is, the lower is its valuation.

On the other hand, Singapore Airlines’ PE ratio is higher than that of the SPDR STI ETF’s (16.8 vs 11.3).

In sum, we can argue that Singapore Airlines is priced at a discount to the market average due to its low PB ratio and high dividend yield, partially offset by its high PE ratio.

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