SATS Ltd - OCBC Investment 2018-07-20: Terminates MOA With Turkish Airlines

SATS Ltd - OCBC Investment Research 2018-07-20: Terminates Moa With Turkish Airlines SATS LTD. SGX:S58

SATS Ltd - Terminates Memorandum of Agreement With Turkish Airlines

  • Mutual agreement with Turkish Airlines.
  • Cargo vol may be affected by trade tensions.
  • Passenger vol to grow.

Healthy 1QFY19 results

  • SATS posted a 3.0% y-o-y increase in revenue to S$439.4m and an 11.5% increase in net profit to S$63.9m in 1QFY19. The latter increased by 5.9%.
  • Share of after-tax profits from associates and JVs dipped 1.3% with lower contributions from Gateway Services’ associates/JVs.

MOA with Turkish Airlines terminated

  • With respect to SATS’s Memorandum of Agreement (MOA) with Turkish Airlines relating to the provision of in-flight catering services at the Istanbul New Airport, the relevant parties have mutually agreed to terminate the MOA.
  • SATS also recently experience in this segment of the market.

Decent dividend yield of 3.7%

  • Despite the threat of SE Asia to keep pace with burgeoning consumer interest. However, pricing pressures are expected to remain as airline margins are still constrained, especially in Asia.
  • We tweak our cost of equity assumptions and our fair value estimate slips slightly from S$5.50 to S$5.39. 
  • Currently, the stock has a forecasted FY19F dividend yield of 3.7%. 
  • (Downgrade to HOLD)

Low Pei Han OCBC Investment Research | https://www.iocbc.com/ 2018-07-20
SGX Stock Analyst Report HOLD Downgrade BUY 5.39 Down 5.500