SIA Engineering Company Ltd (SGX: S59), which is one of the subsidiaries of Singapore Airlines Ltd (SGX: C6L), provides aircraft maintenance, repair, and overhaul services to over 80 international airlines around the world.
SIA Engineering’s current stock price of S$3.18 is just 3.2% higher than a 52-week low of S$3.18. This may raise a question among investors: Is the company a bargain now?
Our FREE SGX stock pick!
Unfortunately, there is no easy answer. But, we can still get some insight by comparing SIA Engineering’s current valuations with the market’s. 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).
SIA Engineering currently has a PB ratio of 2.45, which is nearly double the SPDR STI ETF’s PB ratio of 1.23. It’s a similar story when comparing SIA Engineering’s PE ratio with that of the SPDR STI ETF’s (20.4 vs 11.4). On the other hand, SIA Engineering has a higher dividend yield of 4.09%, as compared to the market’s yield of 2.94%. The higher a stock’s yield is, the lower is its valuation.
Putting it all together, we can argue that SIA Engineering is trading at a premium to the market average, given its higher PB ratio and PE ratio. Income investors may still find the company’s market-beating dividend yield attractive, but it’s worth noting that a stock’s yield says nothing about its ability to sustain its dividend payouts.
Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know--and we've laid them all out in The Motley Fool Singapore's new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge--simply click here now to claim your copy.
Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.
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.