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SIA resumes share buybacks after nearly eight years; abrdn trims stake in AEM Holdings

The Edge Singapore
The Edge Singapore  • 4 min read
SIA resumes share buybacks after nearly eight years; abrdn trims stake in AEM Holdings
SIA is meeting competition by upgrading its premium economy class offerings / Photo: SIA
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Flag carrier Singapore Airlines C6L -

(SIA) recently resumed buying back its own shares on the open market after more than seven-and-a-half years. The most recent acquisition was on April 9, when it bought 17,300 shares at between $6.41 and $6.43 each. This brings the total number of shares bought under the current mandate to 887,000 shares, equivalent to 0.03% of the company.

The airline started the recent bouts of buying on March 7 when it acquired 178,100 shares at $6.44 each. This was followed by 200,000 shares at $6.43 each on March 8; 121,900 shares at between $6.35 and $6.41 each on March 11; 19,700 shares at $6.43 each on April 4; 200,000 shares at $6.38 and $6.42 each on April 5 and 150,000 shares at between $6.39 and $6.42 each on April 8. The airline last bought back shares on the open market on Sept 14, 2016, when it acquired 135,200 shares at between $10.52 and $10.57 each.

Back in September 2016, SIA was trading at around 12.5 to 13 times P/E, coming off nearly 30 times from a year earlier. In contrast, SIA shares are trading at just over seven times P/E at current levels.

On Feb 20, SIA reported earnings of $659 million for 3QFY2024 ended Dec 31, 2023, up 4.9% y-o-y. Revenue rose 4.9% y-o-y to $5.08 billion, which was a quarterly record. For the nine months ended Dec 31, 2023, revenue rose 7.4% y-o-y to $14.2 billion while earnings rose 35% y-o-y to $2.1 billion.

In its earnings commentary, SIA warns that passenger yields are under pressure from growing competition as rival airlines put back more capacity. “Heightened geopolitical tensions and economic uncertainty could also weigh on business sentiment and the demand for air travel. High fuel prices, inflationary pressures as well as supply chain constraints also present a more challenging operating cost environment globally for airlines,” the airline adds.

Nonetheless, demand for air travel remains healthy from January to June. “Forward sales continue to be robust, in line with capacity increases in most markets, supported by demand for leisure travel through the school holidays and Easter peak in March and April 2024,” says SIA.

See also: UMS insiders, AEM independent director raise respective stakes; DBS CEO gains $13.8 mil in sale

To meet the competition, SIA recently announced an upgrade of its premium economy offerings.

Is the worst over for AEM?

See also: DBS CEO sells more shares, pockets proceeds of $13.8 million thus far this month

UK fund manager abrdn has been gradually trimming its stake in chip tester AEM Holdings AWX -

over the past month or so. The most recent transaction was on April 5 when it sold 444,300 shares on the open market for nearly $1.07 million or $2.40 each. This follows the sale of 1.59 million shares at $2.42 each on April 4. On March 5, it sold 402,800 shares for $965,994.96 or $2.40 each. Two days later, on March 7, it bought 797,400 shares or $2.30 each. Following the April 5 sale, abrdn is left with around 30.6 million AEM shares, equivalent to 9.896% of the company, down from 10.04%.

At this level, abrdn’s stake in AEM Holdings is just a shade below the 11.146% held by Malaysia’s Employees Provident Fund, whose most recent transaction was the acquisition of 564,500 shares at about $3.35 each last November. AEM’s largest shareholder remains Temasek Holdings, which holds a stake of 12.5% via a subsidiary called Venezio.

AEM shares recently received upgrades from analysts such as Jarick Seet of Maybank Securities, following the company’s announcement that it had won a high volume order for its automated burn-in solution by a major fabless provider of high-performance computing (HPC) and AI semiconductor chips. AEM did not name this customer.

In his April 3 report, Seet estimates this contract should contribute at least 5% of AEM’s revenue in FY2024 ending December. “In addition, he expects AEM’s core customer to increase orders in 2HFY2024 based on Seet’s channel checks as other suppliers are getting encouraging forecasts,” says Seet.

“As a result, we think the worst is over for AEM and raise our FY2024 revenue and patmi projections by 24% and 50%, respectively,” adds Seet, who has upgraded his call from “hold” to “along” along with a higher target price of $2.78 from $2.13, based on an unchanged blended 15 times earnings for FY2024 and FY2025.

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