SIA Engineering Company Ltd (SGX: S59), or SIAEC for short, specialises in aircraft maintenance, repair, and overhaul (MRO) services for over 80 international airlines around the world. It’s also one of the subsidiaries of Singapore Airlines Ltd (SGX: C6L).
At the current price of S$3.03 (at the time of writing), SIA Engineering’s shares are just 4 cents higher than the 52-week low price of S$2.99. This raises a question: Is SIA Engineering 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 insights by comparing SIA Engineering’s 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).
SIA Engineering currently has a PB ratio of 2.3, which is higher than the SPDR STI ETF’s PB ratio of 1.1. In addition, SIA Engineering’ PE ratio is higher than that of the SPDR STI ETF’s (18.5 vs 10.6).
Yet, the engineering company’s dividend yield of 4.3% is higher than the market’s yield of 3.0%. The higher a stock’s yield is, the lower is its valuation.
In sum, we can argue that SIA Engineering is priced at a premium to the market given its high PB ratio and high PE ratio. Yet, income investors might find the company’s current dividend yield of 4.3% to be attractive.
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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.