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
- paying S$119.3m for c.38.6% of Ground Team Red, and
- 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
5.020
Same
5.020
