SATS

OCBC on 15 May 2012

SATS Ltd’s (SATS) reported its FY12 financial results that were mostly in line with market expectations. SATS’ FY12 PATMI of S$171m was 2% higher than consensus estimate, even though revenue came in 2% below the street’s estimate at S$1.69b. Management proposed a final dividend of S$0.06/share and a special dividend of S$0.15/share, which translates to a full-year dividend payout ratio of 169%. By our estimation, SATS recorded organic revenue growth of 4% in FY12, driven by strong growth of 9% and 13% YoY in its Gateway services and In-flight catering segments respectively. Its Japanese subsidiary TFK also continued its post-earthquake recovery. However, share of net profit of associates slipped 12% to S$41m in FY12. We maintain its HOLD rating but increase our fair value estimate of SATS from S$2.43/share to S$2.55/share.

FY12 in line with market expectations
SATS Ltd’s (SATS) reported its FY12 financial results that were mostly in line with market expectations. SATS’ FY12 PATMI of S$171m was 2% higher than consensus estimate, even though revenue came in at S$1.69b, which was 2% below the street’s estimate. Management proposed a final dividend of S$0.06/share and a special dividend of S$0.15/share. Together with the interim dividend of S$0.05/share, SATS’ dividend payout ratio in FY12 was 169% of net profit.

Stable organic growth
In FY12, SATS underwent significant changes to its business segments due to 1) a full-year’s contribution from its Japanese subsidiary Tokyo Flight Kitchen (TFK) and 2) the divestment of its previous U.K. subsidiary Daniels. By our estimation, SATS in FY12 recorded strong organic revenue growth of 9% and 13% YoY in its Gateway services and In-flight catering segments respectively. However, revenue of its non-aviation food services segment was flat YoY. Collectively, these three business segments recorded organic revenue growth of 4% in FY12. In addition, its Japanese subsidiary TFK has recorded four consecutive quarters of steady QoQ recovery, as meal volumes continue to increase post-earthquake and stricter cost controls were implemented.

Less contribution from associates
In the latest financial statements, SATS changed its accounting presentation of its share of profits of associates line to net of tax, rather than the pre-tax figures previously provided. Compared to the restated FY11 share of net profits of associates, contribution from associates slipped 12% to S$41m in FY12. Management attributed the fall to lower cargo volumes handled by its associates and a weaker USD.

Maintain HOLD with higher fair value of S$2.55
We maintain its HOLD rating but increase our fair value estimate of SATS from S$2.43/share to S$2.55/share, by pegging our FY13 EPS forecast against SATS’ five-year average P/E multiple of 14.5x.