Singapore Airlines is up 0.3% at $10.71, broadly in line with the STI’s 0.4% rise, shrugging off news a person with knowledge of the discussions told the Wall Street Journal it is near a deal to sell its 49% Virgin Atlantic stake for US$300 million-US$500 million ($246-$409 million), compared with the GBP600 million ($1.2 billion) purchase price.
“It seems like it’s probably quite a fair price. It’s been an underperforming investment for some years,” says Paul Yong, an analyst at DBS Vickers. “From an initial investment point of view, it’s a substantial writedown. But they would have written most of that investment down already, so they would still book a gain,” he says.
The question is, “what do they do with the cash? Do they pay it out to shareholders,” he says, noting SIA already has a substantial amount of cash on its books, “or do they try to reinvest it in Asia, which is their area of focus.” He notes SIA has previously had deals fall through in India and China.
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