SATS Limited - OCBC Investment 2017-06-22: A Likely Beneficiary Of Japan Tourism Boom

SATS Limited - OCBC Investment 2017-06-22: A Likely Beneficiary Of Japan Tourism Boom SATS LTD. S58.SI

SATS Limited - A Likely Beneficiary Of Japan Tourism Boom

  • With Japan targeting to receive 40m inbound visitors by 2020, we believe SATS Limited (SATS) will be a likely beneficiary through its Japan airline catering subsidiary, TFK. 
  • The tourism boom in Japan is not new news – Japan recorded double-digit YoY growth in foreign visitors for the past five years (2012-2016) and for the period Jan-Apr 17, Japan continued to register strong growth of 16.4% YoY to 9.1m foreign visitors. Note that the 2020 Summer Olympics will be held in Tokyo, Japan, which is another factor that may help sustain the strong tourism growth. 
  • TFK operates in both Narita and Haneda airports in Tokyo – and according to CAPA Centre for Aviation, Narita and Haneda airports are ranked first (35.8%) and third (18.1%) in terms of market share in Japan, respectively, based on international seat capacity. 
  • That said, the intense competition in the airline catering business at these two airports is persistent and is also the key reason for the weak profitability of TFK more than a year back, although it recorded improvement in FY17 after securing Delta Airlines’ multi-year contract that commenced in 3QFY16. 
  • Hence, for now, we keep our forecasts unchanged. Maintain HOLD on SATS with the same Fair Value of S$5.12.




Eugene Chua OCBC Investment | http://www.ocbcresearch.com/ 2017-06-22
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 5.120 Same 5.120



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