Long-Term Investment: SIA

Recommended Type: Long-term Investment
Sector: Transport, Storage & Communications

Background Information:
The Company (SIA) was incorporated as a wholly-owned subsidiary of the Singapore government through Temasek Hldgs (Pte) Ltd on 28 January 1972 as a public company with limited liability.

Its history began in 1947 when a twin-engined Airspeed Consul under the Malayan Airways Ltd’s insignia started scheduled services between Singapore, Kuala Lumpur, Ipoh and Penang. Malayan Airways Ltd grew steadily and by 1955, international services were added to its operations.

With the formation of the Federation of Malaysia in 1963, the airline was renamed Malaysian Airways Ltd. In 1966 the governments of Malaysia and Singapore acquired joint control of the airline, which was then renamed Malaysia-Singapore Airlines Ltd. In 1971, MSA was restructured into 2 entities; Malaysia Airline System Bhd and SIA.

SIA is one of the world's most successful airlines, with the distinction of having one of the youngest and fastest growing fleets in the world. As at end March 1999, SIA was operating 572 passenger flights a week out of Singapore. Its route network, including Silkair's and codeshare services, covered 110 cities in 42 countries. In 2000, the Company bought 49 percent of Virgin Atlantic airline for US$950 million.

Principal activities of the Company and the Group consist of air transportation, aero-engine overhauling services, simulator training, airport terminal services, marketing of aircraft cabin equipment, properties, aviation and general insurance and related activities.

Subsidiaries:
-SilkAir
-Tradewinds Tour and Travel
-SIA Engineering Company
-SIA Cargo
-SATS

Leaders:


Chairman: Stephen Lee Ching Yen
-Managing Director of Shanghai Commercial and Savings Bank Ltd. (Taiwan) and GMT Investments Pte Ltd
-President of the Singapore National Employers Federation
-Chairman of the Singapore Business Federation
-Member of the Advisory Panel of Temasek Holdings (Private) Limited
-Nominated Member of Parliament from 1994 to 1997
-Chairman of International Enterprise Singapore from 1995 to 2002
-Awarded Distinguished Service Order in 2006
-Alternate Member of the Council of Presidential Advisers


CEO: Chew Choon Seng
-Held senior assignments in Finance, Planning and Marketing, at head office and
overseas
-Member of the Board of Governors of the International Air Transport Association
(IATA) since June 2003
-Named Outstanding CEO for 2007 by the judges of the 23rd Singapore Business Awards in March 2008

Secretary: Ethel Tan Mei Lian

Data (as of 2008-03-31):
Current Ratio: 1.395
Closing Price (as of 2009-03-11): $10.10
Debt to Equity Ratio: 0.110
Dividend Cover: 1.730
Dividend Per Share: SGD 1.000
Dividend Yield: 9.823%
Net Tangible Assets Per Share : SGD 12.660
Price Earnings Ratio: 6.042
Return On Equity: 13.550%
Return On Total Assets: 7.729%
Market Capitalization: $11.7212B
Net Profit: $2.1369B

Reasons to Buy:
a) Owes little debt
b) High dividend per share
c) High RoE
d) Management in favourable position
e) Possible greater share prices following more investors to fuel further growth
f) Shares less volatile due to high market capitalization
g) SIA being a blue-chip company with massive amount of market capitalization will experience minimal decrease in share prices during current economic downturn
h) SIA being government funded and holding a reputation as a world class airline with multiple sources of revenue will continue to profit from tourism sector despite current economic crisis
i) Leaders (Chairman and CEO) have good reputation and possess much experience in leading corporations and being in leadership and board roles in various major companies, hence being able to help company sign new contracts and take up various profitable projects
j) RSI slightly below average currently = Undervaluation during current economic crisis = Possible huge profits if invested now

Sources:
www.sgx.com
www.cimbinvest.com
SIA 2008 Annual Report

Done By:
Alvin Ong
Lee Zi Jian
Lester Mok
Irvin Ho