SATS LTD. (SGX:S58)
SATS - Operations Bottomed But Recovery Subdued
- SATS (SGX:S58)'s 1Q21 results were within expectations. Revenue declined 55% y-o-y to S$209mn with a net loss of S$43mn in 1Q21.
- The net loss was after tax credit and government relief of totalling around S$80mn.
- Operationally the airport traffic has bottomed but any recovery will be tepid.
- We maintain our SELL recommendation on SATS with an unchanged target price of S$1.95. Our valuations are pegged to P/B average of 1.35x during the global financial crisis in 2009. The trajectory for any meaningful recovery in air traffic is uncertain and prolonged.
The Positives
Restructuring staff cost.
- Staff cost excluding the S$61.7mn government relief was cut by around 32% y-o-y in 1Q21. The number of employees has been lowered by 19% y-o-y to 13,500.
Cargo is relatively stronger.
- Cargo segment has performed relatively better than other segments. Cargo handled declined 51% to 221k in 1Q21, in comparison passengers handled tumbled 99% to 0.2mn.
The Negatives
Associates a major source of weakness.
- With government relief, SATS suffered an operating loss of S$36mn. It was comparable to the S$31mn losses by associates and joint venture. China was the largest drag to associates. The closure of Beijing Daxing Airport was a reason for the losses in China.
Outlook
- FCF in 1Q21 was a negative $71mn. With a cash balance of S$723mn (net debt: S$152mn), SATS can easily ride out the current downturn or another 10 quarters of the similar level of FCF cash burn-rate. SATS has likely bottomed out operationally but we worry such listless conditions may persist for another three to four quarters.
Maintain SELL with a target price of S$1.95
- Without any clarity of a sustainable and material improvement in air travel and net losses to persist for the company, we maintain our SELL recommendation on SATS with an unchanged target price of S$1.95. Our forecast is unchanged.
- See SATS Share Price; SATS Target Price; SATS Analyst Reports; SATS Dividend History; SATS Announcements; SATS Latest News.
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2020-08-25
SGX Stock
Analyst Report
1.950
SAME
1.950
