Our investment thesis for Singapore Airlines (SIA) is simple: SIA is the proxy for investing into Singapore’s growing strength as the Asean hub — for finance (such as family offices), digital tech, R&D, healthcare, transportation and logistics. Changi Airport is, increasingly, the regional hub for air transportation. Plus, it is a unique investment opportunity with a lopsided risk-return proposition.

The stock, battered by the Covid-19 pandemic as were all airline stocks, has high upside returns — as global trade continues to recover and when cross-border travel is allowed. On the other hand, there are very limited downside risks since it will never be allowed to fail. SIA is a critical national asset of Singapore. As an island state, it cannot do without a strong airline and port facilities. We believe this high-return, low-risk assessment is not factored into SIA’s valuations. As far as airline stocks go, there is almost no equivalent risk comparison.

The case to buy SIA has strengthened since we bought it in mid-August last year. The number of positive Covid-19 cases globally is finally on a declining trend, after peaking in mid-January 2021. Singapore’s major trading partners including Germany, the UK and even the US and Indonesia are all reporting declining numbers of cases in recent days. Others, like China, Taiwan and India, are managing the pandemic well. With the approval of more vaccines, rising production and inoculation of the world’s population in progress, we will surely see the return of air travel and stronger growth in trade in the months ahead.

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