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. The company also has a subsidiary, SIA Engineering Company Ltd (SGX: S59), which specialises in aircraft maintenance, repair, and overhaul (MRO) services to over 80 international airlines around the world.
At their current price of S$9.53 (at the time of writing), Singapore Airlines’ shares are down 20% from their 52-week high price of S$11.84. So, is Singapore Airlines 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 Singapore Airlines’ 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).
Singapore Airlines currently has a P/B ratio of 0.9, which is lower than the SPDR STI ETF’s P/B ratio of 1.1. In addition, the airline’s dividend yield of 4.0% is higher than the market’s yield of 3.6%. The higher a stock’s yield, the lower its valuation.
However, Singapore Airlines’ P/E ratio is higher than that of the SPDR STI ETF’s (32.3 vs. 12.3).
Singapore Airlines is priced at a discount to the market average due to its low P/B ratio and high dividend yield, partially offset by its high P/E 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.