SATS (SATS SP) - DBS Research 2017-11-01: SATS Swaps T4 Ground Handling With AirAsia's Ground Handling Business

SATS (SATS SP) - DBS Vickers 2017-11-01: SATS Swaps T4 Ground Handling With AirAsia's Ground Handling Business SATS LTD. S58.SI

SATS (SATS SP) - SATS Swaps T4 Ground Handling With AirAsia's Ground Handling Business

  • SATS takes 49% of AirAsia’s ground handling business at Malaysia Airports.
  • Consideration satisfied with S$119m cash and 80% of its stake in T4 ground handling subsidiary.
  • On track to enhance connectivity strategy in Asia, positive for SATS.
  • Maintain BUY and S$5.02 TP.



What’s New 


In a swap deal with AirAsia. 

  • SATS has entered into a deal to take a 49% stake in AirAsia’s ground handling business in exchange for 40% of its T4 ground handling business. SATS will effectively hold 60% in SATS Ground Services Pte Ltd (T4’s ground handling business) and c.49% in Ground Team Red Sdn Bhd (AirAsia’s ground handling operations). The deal sees SATS
    1. paying S$119.3m for c.38.6% of Ground Team Red, and
    2. taking c.11.4% in Ground Team Red by giving up 80% of SATS Ground Services.

Positive for SATS strategy wise. 

  • AirAsia’s ground handling serves only AirAsia in Malaysian airports. Earnings are undisclosed but we believe operations are profitable. We believe the deal is positive for SATS strategy-wise as it now has a stake in a Malaysian ground handling business to add to its network. 
  • SATS had previously acquired 34.3% of Brahim’s Airlines Catering Sdn Bhd in 2015. Existing business at Changi is not affected since the new entity is dedicated to only T4.

Maintain BUY. 

  • Maintain positive stance on SATS with Buy recommendation and S$5.02 TP. 
  • 2Q18 results will be announced on 9 November 2017.




Alfie YEO DBS Vickers | Andy SIM CFA DBS Vickers | http://www.dbsvickers.com/ 2017-11-01
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 5.020 Same 5.020



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