SIA - A Great Way To Fly

 

Bought some SIA shares (Singapore Airlines) today. Base on SIA Financial Report for FY12, it appears that the asset is more than its liability. Recently, SIA prices have been falling due to its poor financial performance amidst a bear market. A drop of more than 7%.  There are negative views and concern as SIA purchased a new fleet of airplane which may harm its financial sustainability. Recently, SIA had also announced that it is not giving special dividend for the current year.  A deviation of its  usual practice of issuing special dividend once every 2 years.

A Sunday Times reporter has also written an article on 2 Jun 13 highlighting the poor service associated  with its subsidiary SilkAir. The reporter wrote that his request, written as well as through phone call, for front passenger seats for his elderly parents were ignored. Even though the crew on board tried to salvage the situation, the initial impression of poor communication which led to poor service has been formed.

With so much bad publicity, why buy SIA? The answer is simple, the price has dropped to a reasonable level. The net asset is more than the current price. I invest for the long term waiting for the price to appreciate. The immediate threat is the price of fuel which airlines like SIA pay substantially as an operating cost. The price of oil has been hovering between US$90 and US$100 level. Stability of oil price is important for companies to price their goods and services. The other threat is competition in the air transport industry.  This will be challenging for SIA.

SIA closes at S$10.35 on 7 Jun 13. This blog is not an inducement to purchase SIA shares.