SATS Ltd Is Trading Close To Its 52-Week Low Price: Is It Cheap?

SATS Ltd (SGX: S58) is a company providing food solutions and gateway services solutions. The Food Solutions division covers airline catering, food distribution, and industrial catering, whereas the Gateway Solutions division is involved in ground handling services of passengers, flights and cargo.

At the share price of S$4.74 (at the time of writing), SATS’ shares are just one cent higher than the 52-week low price of S$4.73. This raises a question: Is SATS 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 SATS’ 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).

SATS currently has a PB ratio of 3.3, which is higher than the SPDR STI ETF’s PB ratio of 1.1. Similarly, its PE ratio is higher than that of the SPDR STI ETF’s (20.3 vs 11.0). On the other hand, the company’s dividend yield of 3.8% is higher than the market’s yield of 3.6%. The higher a stock’s yield is, the lower is its valuation.

In sum, we can argue that SATS is priced at a premium to the market average due to its high PB ratio and high PE ratio, offset marginally by a higher dividend yield.

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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. Motley Fool has a recommendation for Sats.