Thursday, December 13, 2012

Down 1 Million = Profits.

Singapore Air bought the stake for S$1.65 billion and sells it for S$440 million.  (Source: Bloomberg)

Singapore Air will book an S$322 million gain from the sale, after accounting for a writedown in its investment of Virgin Atlantic. So Virgin in the eyes of SIA is worth S$118 million ($440m-$322m) and selling it gives SIA a profit, so that the shareholders can get dividends at year end (which is now)? (Profit: Source: ST)

In 1999, the airline paid $220 million for a 25% stake in Air New Zealand; it is now worth only $28 million after the bankruptcy of ANZ'S Australian subsidiary, Ansett.


My thoughts:

1) If you buy at $1.65 billion and sell at S$440 million, you lose $1.21 billion + interests for all the years. (you don't have a profit)

2) Singapore Air will book an S$322 million gain from the sale?? Really? SIA bought it years back for $1.65 billion.

3) All the Singapore Media seems to congratulate SIA for making a profit?

4) Isn't there any accounting standards for at least listed companies to follow? This data is just ridiculuous!

5) SIA's majority shareholder is Temasek Holdings and are the profits going to be divided by shareholders while something is underwritten and expense off and absorbed by Temasek Holdings or GIC which uses sovereign funds but is not transparent to the public?

Something smells wrong here, and I sure hope there are more ways to shad more light into this matter.

-- Iron Bowl


rice ja said...

hi juz some 3 cents.
Airplanes got lifespan and value will depreciate over the years
So maybe SIA clock in their profit over the years + the value of the aircrafts now VS the price they managed to sell = profit?

Iron Bowl said...

Value of aircraft does not really affect the value of the company. If the airplanes are not maintained at all and the depreciation is not factored at all, then that company is bound to fail.

Fixed assets are accounted for in all companies, especially listed ones