SIA Engineering Company Ltd (SGX: S59), or SIAEC, specialises in aircraft maintenance, repair, and overhaul (MRO) services for over 80 international airlines around the world. It’s also a subsidiaries of Singapore Airlines Ltd. (SGX: C6L).
At their current price of S$2.36 (at the time of writing), SIA Engineering’s shares are down by 30% from their 52-week high of S$3.35. Is SIA Engineering cheap now? If shares are cheap, it might be a good opportunity for investors.
There is no easy answer, but we can get some insight by comparing SIA Engineering’s current valuation with the market’s valuation. We’ll use three common valuation metrics: the price-to-book (P/B) ratio, price-to-earnings (P/E) 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 P/B ratio of 1.8, which is higher than the SPDR STI ETF’s P/B ratio of 1.2. In addition, SIA Engineering’s P/E ratio is higher than that of the SPDR STI ETF’s (16.1 vs. 11.5).
However, the conglomerate’s dividend yield of 5.1% is higher than the market’s yield of 3.6%. The higher a stock’s yield, the lower its valuation.
SIA Engineering looks to be priced at a premium to the market given its high P/B and P/E ratios. Yet, income investors might find the company’s current dividend yield of 5.1% 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.