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4 Stocks This Week (SIA $15B Fundraising) [30 April 2020] SIA; SIA EC; SATS; ST Engineering

Even strong companies need to make their cash last through the COVID-19 downturn.


In his Labour Day speech on 1 May 2020, Prime Minister Lee Hsien Loong put great emphasis on the role air transport has played to position Singapore as a global and regional hub.

Underscoring Singapore’s commitment to SIA, PM Lee said: “The government is determined that SIA will see through this crisis. SIA has always flown Singapore’s flag high all over the world, and made us proud. We will spare no effort to enable it to do so again.”

As Singapore’s national carrier, Singapore Airlines (SIA) has supported Singapore’s combat against COVID-19, including flying in essential supplies, mounting evacuation flights to bring Singaporeans’ home and having its cabin crew serve as care ambassadors and safe distancing ambassadors.

Of course, its operations have also been severely impacted as its air crafts have been grounded on the back of lockdowns in Singapore and the majority of countries around the world.

In this instalment of 4 Stocks This Week we look more closely at Singapore’s aviation sector.

Read Also: Restarting Singapore’s Economy: 5 Takeaways From PM Lee’s May Day 2020 Speech

SIA (SGX: C6L)

As the national carrier, SIA has been severely hit by the impact of COVID-19 on border control, air travel and tourism. On 23 March, SIA announced that it has cut 96% of its capacity, resulting in the grounding of 138 out of 147 SIA and SilkAir aircraft, and 47 of 49 Scoot aircraft.

On Thursday (30 April 2020), SIA held its virtual Extraordinary General Meeting (EGM), where 99.79% of SIA’s shareholders approved a $15 billion fundraising exercise. To ensure this $15 billion lifeline lasts, SIA has also embarked on cost-cutting measures, including a cut in fees for management and company directors are also agreeing to a cut in their fees, while there will be salary cuts and compulsory no-pay leave for employees.

Since the start of the year, SIA has plunged to all-time lows of $5.35. It is currently trading at $6.11, which is 33% lower than at the start of the year.

Read Also: 5 Groups Of People That Are Severely Impacted By The Sudden Extension Of Circuit Breaker

SIA Engineering (SGX: S59)

A 78%-owned subsidiary of SIA, SIA Engineering (SIAEC) operations is also expected to be hindered by the COVID-19 pandemic. The company is in the business of 1) engine & engine component repair & overhaul, 2) component repair & overhaul, manufacturing & engineering services, 3) fleet management services, 4) line maintenance services and 5) airframe maintenance services.

Similar to SIA, SIAEC’s management and board of directors have also cut their pay and fees between 20% and 25%. Other lower management team will see their pay cut up to 5% and 15%. The group will also cut non-essential operating costs, including compulsory no-pay leave.

Trading at $1.87, SIAEC’s share price has fallen nearly 34% since the beginning of the year.

Read Also: Looking For Work Amid The Challenging COVID-19 Job Market? These Government Initiatives Can Help

SATS (SGX: S58)

Another company which derives the bulk of its revenue from the air-travel sector, SATS has warned shareholders of a substantial financial hit from the coronavirus outbreak. It has also implemented pay cuts for its senior and middle management of between 12% and 5%.

In 2020, SATS’ share price has dipped close to 50%, from $5.06 at the start of the year to $2.58 in late March. It has since witness a recovery to trade at $3.28 today, which is still a 35% dip in the year-to-date.

Read Also: 4 Things We Can Learn From The Singapore Government’s Response To COVID-19 Crisis And Apply To Our Personal Finances

ST Engineering (SGX: S63)

With about 44% of its revenue derived from the Aerospace segment, ST Engineering will also be heavily impacted by the air travel shut down due to COVID-19’s. In addition, its other segments will also see a varying degree of strain.

ST Engineering’s CEO will reduce his salary by 10%, while senior management team will take a pay cut of between 5% and 10%.

ST Engineering’s share price has held up more firmly than the other companies on this list, likely owing to its diversification across multiple sectors. Its share price has dipped 13% since the start of 2020 to $3.43.

Read Also: 5 Things Singapore Can Do Today To Reduce Their Expenses During This “Circuit Breaker”

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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.