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Financial Statement Analysis

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Financial Statement Analysis


In order to get a comprehensive analysis on SIA’s financial statement analysis , we compared SIA’s 5 financial year ending(FYE) results with the industry’s average and 2 of its main competitors Cathay Pacific Airways and Qantas Airways . Cathay has been trailing closely to SIA in terms of first class cabin service and profitability for years. Qantas has long been dominating the highly profitable Kangaroo route and is ranked 5th in the world by Skytrax’s survey . Please refer to appendix for the actual figures for every analysis below.

Liquidity Analysis

Current Ratio: SIA’s current ratio is more than 50% above industry average and its competitors showing SIA’s strong liquidity position in meeting its short term obligations. However, with the aggressive acquisition of 19 A380s, its current ratio is expected to drop in the next few years. This might not be a concern as the A380s is expected to bring more benefits than costs to SIA which will be explained in the next section.

Operational Efficiency Analysis

Assets Turnover Ratio: SIA’s recorded significantly lower asset turnover ratio compared to the industry average and its competitors, showing that SIA is relatively ineffective in utilising its assets in generating sales.

Receivables Turnover: With a lower receivables turnover ratio than the industry, SIA should consider reviewing its credit policies to ensure timely collection of imparted credit that is not earning interest for the firm.

Profitability Analysis

Sales: SIA’s revenue has been increasing for the last 2 years since FYE2005. However, this growth has slowed down from double digit growth to 8.6% recently. This is not a concern as SIA is still considered as one of the more profitable companies in the industry as shown in its Net Income and Operating profit ratios. With the new addition of A380s they will also be able to charge higher prices.

Return on Assets/Equity/Invested Capital: SIA’s ROA is 4 times above industry average and significantly higher than its competitors. Its ROE and ROIC is also significantly higher than the industry. All 3 ratios have surpassed Cathay recently. This shows SIA management’s capability in providing high returns for its shareholders now and the future.

Capital Structure Analysis (Solvency)

Debt to equity ratio: SIA’s D/E ratio is significantly lower than the industry average and its competitors. It is financing its growth mainly with equity giving it a lower exposure to risks associated with interest rates.

Market Value Analysis

EPS: SIA’s current EPS has doubled since 2003 and is significantly higher than its competitors. With the recent capital reduction exercise , SIA’s EPS will be enhanced and investors can expect higher returns in future years.

Dividend yield: In addition to its high EPS. Dividend yield more than doubled from 3% to 6.5%.

PE Ratio: Despite the rising trend of SIA’s stock over the past few years , its PE ratio is still relatively low compared to the industry average and Cathay’s. This shows that there is still upside potential in the stock price. Various analyst reports have rated SIA’s stock to outperform until its P/E ratio of 15X .

Economic Value Added: SIA’s has a

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