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
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http://www.ocbcresearch.com/
2017-06-22
OCBC Investment
SGX Stock
Analyst Report
5.120
Same
5.120
