SATS LTD
S58.SI
SATS (SATS SP) - Solid earnings amidst market turmoil
Maintain HOLD; Robust earnings outlook priced in
- We maintain HOLD and SGD3.82 TP (18x FY3/17E EPS) on SATS.
- While the company’s earnings outlook remains robust (FY15-18 CAGR of 7.6%), we believe the rosy picture is already priced in.
- Our TP is based on 18x PER, which is 1 SD above its historical average to reflect robust earnings outlook.
- However, we see limited upside at current valuations.
3Q16 in-line; Healthy margins
- 3Q16 net income of SGD60.6m (+12.8% YoY, +1.5% QoQ) was inline with 9M16 at 75% of our full year estimate.
- The decline in operating costs outpaced the fall in revenue with EBIT margins improving by 2.7ppt to 14.0%.
- The sharp 29% decline in non-aviation revenue to SGD69.9m is not a concern as it is driven by the de-consolidation of its food distribution business to its new JV with BRF.
Uptick in aviation sales; Management stays cautious
- Aviation revenue improved by 5.3% YoY to SGD370m. This was driven by higher workload from the return of Jetstar as its ground handling customer and better TFK contributions.
- The bottom line was also helped by the SGD2m decline in licence fees due to rebates received from Changi Airport.
- Despite the positive performance, management appears cautious, flagging the challenging operating environment due to economic uncertainty and low consumer confidence.
Strong contributions from Japan
- Revenue for its inflight catering business in Japan improved by 14.5% YoY to SGD60.0m. The stronger contribution was driven by better underlying performance from the start of its contract with Delta in Oct 2015.
- We expect its operations in Japan to benefit from the surging visitations to the country.
Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-02-15
Maybank Kim Eng
SGX Stock
Analyst Report
3.82
Same
3.82
