Singapore Airlines is cutting 96% of the capacity due to the tightened border controls to stem Covid-19. SIA (SGX: C6L) shares are currently at a low of S$5.40. Is now a good time to buy SIA shares? - Seedly
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Anonymous

Asked on 23 Mar 2020

Singapore Airlines is cutting 96% of the capacity due to the tightened border controls to stem Covid-19. SIA (SGX: C6L) shares are currently at a low of S$5.40. Is now a good time to buy SIA shares?

Given that the national carrier's share price is low now, and might continue to lower further, would now be a good time to buy?

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Clara Ng
Clara Ng, Community Manager at Seedly
Level 6. Master
Answered on 23 Mar 2020

Hi Anon,

Just like how you should do your research before making any big financial decisions, you shouldn’t buy SIA shares now just because its share price is low. It might be a risky move to buy this blue-chip now.

Some factors to consider:

  • SIA has said that cutting 96% of its capacity is the greatest challenge that the group has faced in its existence. SIA could potentially lose over $140 million April, and could be in a precarious position by end June without financial help from the Government, according to UOB Kay Hian’s K. Ajith

  • OCBC Credit Research has again lowered its credit rating for Singapore Airlines

  • DBS Group Research has also downgraded the counter

  • An operating loss for SIA is expected for the fourth quarter ended March 31, 2020 given the fall in revenue for February and March

  • The airline industry is also a price-sensitive industry, which doesn’t work well for the long-term for investors

Some OCBC credit analysts also foresee that SIA will need to seek external financial funding, either from its banking relationships or possibly from its major shareholders.

Take a look at my colleague, Sudhan's article about this topic if you'd like to find out more and dive deeper into it. (It's the link that Brandon shared below)

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Brandon Ho
Brandon Ho, Community Lead at Seedly
Level 6. Master
Updated on 23 Mar 2020

Hi Anon!

Interestingly enough, our Investments Lead at Seedly, Sudhan, has just written an article with regards to this topic! You can check it out here, but do remember to take the advice given with a pinch of salt, and to research the stock and it's market thoroughly for yourself before making any decision.

TL;DR: SIA is a no-go at the moment for these reasons

  • There’s going to be significant capacity cuts amid the fall in demand, no thanks to the Covid-19 pandemic.

  • SIA is operating in a price-sensitive industry, and that doesn’t bode well for the long-term as an investor.

  • Capital is used to keep SIA’s fleet new, and that has caused negative free cash flow for four of the last five years.

  • There could be more pain ahead with SIA’s balance sheet looking shaky.

  • If SIA’s dividend is cut to conserve cash, its 5% dividend yield doesn’t look attractive anymore.

This all points to shares dropping even further, and it can be argued that we have not yet seen the full brunt of Covid-19 on the markets.

Again, do remember that this is just an opinion, do take the time to research and study the stock for yourself!

Feel free to discuss this in the comments below, and do leave an answer to let us know your own thoughts on this!​​​

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👍 3

Hi Anon,

SIA has fallen on bad times. Business has almost grinded to a standstill as they have just announced the halting of flights.

SIA will be issuing rights and mandatory convertible bonds (MCB) Rights will be issued at 3 rights per 2 shares. Exercise price at $3. MCB will be issued at 295 per 100 shares. It is a zero coupon 10y bond.

Full explanation in this video "SIA Bailout? How It Works (Rights And Mandatory Convertible Bond)" : https://youtu.be/gsY_czHU97Y

Also shared before a prequel "INTERESTED IN SIA SHARES": https://youtu.be/TfeLltNAxxw

Given that the national carrier's share price is low now, and might continue to lower further, would now be a good time to buy?

  • There are a few assumptions made. Nobody knows the price direction moving forward for sure. Don't worry about the "now" exact timing of investing. It may impede proper expectations on your investments.

Invest over a period. Hope it helps. If in doubt look for a qualified adviser.

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Alvin Teo
Alvin Teo
Level 6. Master
Updated on 30 Mar 2020

Some people will tell you yes, but given current situation, Some more might tell you no.

but for sure legends like warren Buffett or Walter schloss is going to tell you they don't know. And if they don't know, most people won't know either. also, it's never a good day to buy stocks on a weekday.

Price is not everything, it is just the denominator here. You need to earn about what the Figures is telling you about the business.

Join us on telegram to read more.​​​

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Thiam
Thiam
Level 2. Rookie
Answered on 25 May 2020

SIA closed at $3.63 on 22 May 2020. With its future uncertain but cannot failed position (supported by our sovereign fund), it is worthwhile for a 3-4 year timeframe?

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👍 0

The easiest way to ask is will SIA recover and how much will it recover

And even though now is low, could it go lower?

If you are confident that it will bounce back, you can buy but using dollar cost averaging.

Personally i will say it is a risker bet. Prefer companies that are more resilient.

I make videos about interesting stuff at youtube here​​​

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I take a simpler approach. There are better deals in the STI compared to SIA. At far lower risk and better metric returns.

If you buy it, it shouldn’t be because you think it’s at its lowest. You will be sorely disappointed if it goes to zero. Because that’s the lowest every stock can go.

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