Is SIA Shares Worth Buying Now? (SGX: C6L/ SIAL.SI)
Disclaimer: I may or may not have invest in any of them, what’s listed here is only for entertainment purpose only and it should never be used as any form of investment advice. This is my diary on my stock analysis, although I’ve been investing for +15 years reading +50 investment related books, I am still learning. I wish to share what I know and what I learn during my investment journey so you may learn from my success and mistakes as well!
Right now Singapore Airlines Limited (C6L.SI / SIAL.SI) share price is at SGD$7.150
At this price, Singapore Airlines Limited is valued at a price-to-book ratio of 10.080 and a trailing distribution yield of 5.09%
With the current valuation, would I invest in it?
Let’s go through it using my 7 steps guide and see how I pick the Best Singapore Dividend Stocks.
- Debt to Equity Ratio
- Dividend Yield
- Dividend payout ratio
- EPS Growth Rate
- Return of Equity (ROE)
- Price-to-Book Ratio
- MOAT
Dividend investing is by far the best investing strategy, if you’ve just started investing, and here we will see how we can actually do just that!
Business Background
SIA was founded in 1947 and has its headquarters in Singapore. Singapore Airlines Limited is a subsidiary of Temasek Holdings (Private) Limited.
Singapore Airlines Limited, together with subsidiaries (SATS, SIA Engineering, etc.) provides passenger and cargo air transportation services.
SIA Group Airlines
- Singapore Airline
- SilkAir
- Scoot
- Singapore Airlines Cargo
Airline route network:
- 105 destinations
- 37 countries
SIA has 20 subsidiaries which include:
- SIA Engineering Company
- SATS
- Scoot
- Tiger Airways
- Singapore Flying College
- Tradewinds Tours and Travel.
Operating fleet as of 2020
- 203 aircraft (196 passenger aircraft and 7 freighters)
Singapore Airlines is a member of the global Star Alliance. As one of the world’s premium airlines, Singapore Airlines has a young and modern fleet.
Debt To Equity Ratio
Check for: Less than 0.5 D/E Ratio
Looking at the latest financial data online
SIA have a D/E ratio of 0.648.
This is higher than the 0.5 D/E Ratio.
A D/E ratio of more than 0.5 will means that the company is overleverage and might be a red flag if you are going to invest in low-risk stocks.
With a D/E of close to 1.0, which means the debt is just as much as the equity in the company. This is a very unhealthy balance sheet.
To understand this stock better, I’ve done a quick look at the past Debt to Equity Ratio for SIA:
| Year | D/E Ratio |
|---|---|
| 2023 (On-Going) | 0.613 |
| 2022 | 0.648 |
| 2021 | 0.901 |
| 2020 | 1.265 |
| 2019 | 0.501 |
| 2018 | 0.120 |
It seems to me that the D/E ratio has been <0.5 before 2019 before the pandemic hits the aviation industry.
2020 has been the worst year for SIA where the amount of debt exceeds the equity of the company by over 26.5%.
The D/E ratio started to drop in 2021 and 2022, but it is still >0.5.
This huge variation in the D/E Ratio is probably due to the pandemic.
I will probably guess that the pandemic, it has negatively impacted the company to increase its ability to generate higher revenue and income.
If we are looking just at the D/E ratio, the company has a high risk of the company defaulting.
My Opinion: Fail
Dividend Yield
Check for: More than a 2.5% dividend yield
For the years 2020 to 2022, SIA pay a dividend of SGD 0.00 which is about 0.00% in dividend yield.
SIA did not pay any dividends for the past 3 years.
In 2023, SIA start issuing dividend, and it is calculated to be around 5%.
This is higher than my target of 2.5%.
Looking at the distribution history, the dividend payment stops in 2020 due to the pandemic and start to pick back up in 2022 and 2023.
| Year | Dividend in SGD |
|---|---|
| 2023 (On-Going) | SGD 0.28 |
| 2022 | SGD 0.10 |
| 2021 | SGD 0.00 |
| 2020 | SGD 0.00 |
| 2019 | SGD 0.30 |
| 2018 | SGD 0.38 |
For dividend stocks, I’ll prefer it to increase it’s dividend distribution year-on-year and not have this huge fluctuation.
The dividend yield is good and much higher than the risk-free rate (CPF OA Account) of 2.5%. I will give it a verdict of pass.
My Opinion: Pass
Dividend Payout Ratio
Check for: Less than 80% dividend payout ratio
At the time of writing, a quick check using some of my favorite online stocks info tools shows that the dividend payout ratio for SIA as 23.04%.
This year, the company have started paying out dividend, but it is good to note that there is no dividend in the previous few years due to the pandemic.
With a payout ratio of less than 80%, SIA pass this criteria on payout ratio.
My Opinion: Pass
EPS Growth Rate
Check for: More than 10% EPS Growth
Earning Per Share (EPS) helps to analyze the profitability and quality of a stock.
Here, we will like to see an EPS growth of 5 years or more.
A quick check on the financials.
The EPS 5 year growth rate is “-1.3%”, their Earning Per Share (EPS) for SIA is a negative.
When the EPS growth rate is negative, it means the company have been losing money, thus it is unable to have any growth rate.
This also means the company is losing the shareholder’s value. However, I think this should be temporary.
Nonetheless, SIA fail in this criteria.
My Opinion: Fail
High Return Of Equity (ROE)
Check for: More than 10% ROE
ROE is one of the most important ratios used by Warren Buffett.
Return on Equity is used to measure the management’s ability to make a return on our investment.
At the time of writing, the ROE of SIA have an ROE of 10.2%.
A deep dive into the history of SIA shows it usually has an ROE of -33.9% to 10%.
| Year | ROE % |
|---|---|
| 2023 (On-Going) | 10.2% |
| 2022 | -5.0% |
| 2021 | -33.9% |
| 2020 | -0.2% |
| 2019 | 5.2% |
| 2018 | 10.0% |
The negative ROE is probably due to the impact of the pandemic. And as we are going into the post-pandemic era, the ROE of SIA increases, and it is now reach to be above my 10% ROE criteria.
My Opinion: Pass
Price To Book Ratio
Check for: a P/B Ratio of less than 1.8
SIA is one of the most renowned companies with world-class airlines which tops the best airlines in the world.
With so much attention on SIA, the price of the stock will most likely be traded above its valuation (book value).
But the pandemic has impacted its business.
At the time of writing, the current P/B ratio of SIA is 1.08.
Meaning, it is trading at around its book value.
My Opinion: Pass
MOAT
Check for: Not just having a MOAT, but a great MOAT
SIA is the leading world-class airline that services most countries in the world.
Singapore Airlines is a Certified 5-Star Airline for the quality of its airport and onboard product and staff service.
Product rating is determined by:
- Cabin seats
- Amenities
- Food & beverages
- IFE
- Cleanliness
- Service (Cabin staff and ground staff)
Long Haul
- First Class
- Business Class
- Premium Economy
- Economy Class
Short Haul
- Business Class
- Economy Class
The airline industry is a highly competitive industry.
Top 10 Airlines For 2023
- Qatar Airways
- Air New Zealand
- Singapore Airlines
- Qantas
- Emirates
- Cathay Pacific
- Virgin Atlantic
- United Airlines
- EVA Air
- British Airways
SIA is currently ranked No.3 in the best airline to travel.
SIA is known for its stellar service standards by flight attendants. The airline is famous for its luxurious flight experiences across cabin classes, range of in-flight entertainment options, spacious cabins, and an overall pleasant flight experience.
SQ Girls is SIA’s visual advertising slogan applied to depictions of flight attendants of Singapore Airlines (SIA) dressed in the distinctive sarong kebaya SIA uniform.
According to Phil’s book Rule#1 investing, SIA has the “Brand MOAT”.
Brand MOAT can be an attractive MOAT, especially in a space where life and death matter. It allows you to price your product higher than your competitors while still being able to win the business.
In my opinion, SIA’s Brand MOAT is pretty strong.
My Opinion: Pass
Overall
SIA has a final score of 7/10.
With a good ROE, and return of dividend distribution, I think this have a good potential, however, as I prefer stability for my dividend investing stocks, thus will just KIV for now.
Personally, I think the pandemic is near over and the airline industry is recovering.
As time pass, I think SIA will recover and go back on tract to how it was in the past where it will grow in it’s price and it’s dividend.
Below is how I’ve scored SIA.
| Metrics | Weightage | Score |
|---|---|---|
| Debt to Equity Ratio | High (2) | 0 |
| Dividend Yield | Low (1) | 1 |
| Dividend payout ratio | Low (1) | 1 |
| EPS Growth Rate | Low (1) | 0 |
| High Return on Equity (ROE) | Low (1) | 1 |
| Acceptable Price-to-Book Ratio | Low (1) | 1 |
| MOAT | Very High (3) | 3 |
| Total | NA | 7 |
Gentle Reminder to Myself: When we are doing dividend investing, not only we need to buy stocks when it is at the right price, we only buy stocks that we are confident that it will bring in good returns.
Why Do I Find Some Metrics More Important Than Others?
There are 3 attributes in a company that Warren Buffett wants in particular:
- Wonderful Company at Fair Price
- Stable & Understandable Business
- Vigilant Leadership in Risk Management
This translate to the following 3 metrics I have on my list:
Thus, for these metrics, I will put a higher weightage in my scoring.
Question…
Will you like to buy this stock now?
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