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Singapore Airlines Ltd Is Down 18% From Its 52-Week High Price: Is It Cheap Now?

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$9.73 (at the time of writing), SIA’s shares are around 18% down from its intra-day peak of S$11.84 reached in May. 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 insights by comparing SIA’s current valuations to 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 currently has a PB ratio of 0.8, which is lower than the SPDR STI ETF’s PB ratio of 1.1. In terms of dividend yield, the airline’s dividend yield of 4.0% is higher than the market’s yield of 3.5%. The higher a stock’s dividend yield, the lower its valuation. Yet, SIA’s PE ratio is lower than that of the SPDR STI ETF’s (16.6 vs 11.2).

In sum, we can argue that SIA is probably priced at a slight discount to the market given its low PB ratio and high dividend yield, offset partially 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.