SINGAPORE (Feb 12): Singapore Airlines might pride itself on setting standards in luxury air travel, but its shares might have become too cheap for discerning investors.

Corrine Png, founder of independent research firm Crucial Perspective, figures that the airline would fetch more than $15 billion — or about $12.80 a share — if the whole company were to be liquidated. That takes into account the market value of its owned aircraft, of about $11.2 billion; the market value of its stakes in SIA Engineering Co and Virgin Australia Holdings; and $656 million in cash. Yet, with its shares trading at $10.86 currently, SIA has a market capitalisation of just $12.8 billion.

Why is the company unable to get a better valuation in the market? “It has long been unable to grow its profitability to the extent that many equity investors now see it as a ‘value trap’,” says Png in a recent report. SIA’s average annual earnings over the past five years was just $454 million, less than half of the average $1.1 billion recorded in the preceding decade. Over the same period, the airline’s average net profit margin has also shrunk to 3% from 8.5% previously.

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