SATS’s FY13 results were in line with our expectations, coming in within 2% of our projections. Revenue grew 7.9% YoY to S$1,819m on the back of increases from the gateway and food businesses while operating profit increased correspondingly by 13.8% YoY to S$192.3m. Despite cost pressures related to higher staff expenses and raw material costs, SATS was able to register an improvement of 0.6ppt in operating margin to 10.6% from a year ago. Management declared a final and special cash dividend of 6 S cents and 4 S cents, respectively, to bring the total dividends declared in FY13 to 15 S cents (FY12 total: 26 S cents), representing a payout ratio of 90.3% of PATMI. For FY14, the operating environment remains conducive for SATS and the group should continue to experience broad-based segmental improvements. While we are encouraged by its prospects, valuations at this juncture remain expensive as many of the positives have already been priced in. Therefore, we maintain our HOLD rating on SATS but raise our fair value to S$3.15 (S$2.80 previously) by increasing our peg to 18.5x 12-month forward PE (from 16.5x).
FY13 results in-line
SATS’s FY13 results were in line with our expectations with revenue growing 7.9% YoY to S$1,819m while operating profit increased correspondingly by 13.8% YoY to S$192.3m. SATS was also able to overcome operating cost pressures and recorded an improvement of 0.6ppt in operating margin to 10.6% from a year ago. Management declared a final and special cash dividend of 6 S cents and 4 S cents, respectively, to bring the total dividends declared in FY13 to 15 S cents (FY12 total: 26 S cents), representing a payout ratio of 90.3% of PATMI.
Broad-based demand improvements
The group experienced improvements across the various aviation-related metrics such as passengers, flights handled and meals produced, which all saw healthy growth rates for FY13. More encouragingly, the cargo handling segment saw a slight pickup in 4Q13 to narrow the overall FY13 slide to only 2.8% YoY. In terms of its overseas segments, TFK continued to turn in positive performances following additional contract wins
FY14 outlook positive
We expect the sustained growth of Intra-Asia passenger traffic to provide a conducive environment for the group in FY14. Although operating pressures still remain (i.e. staff and raw material costs), SATS’s ongoing cost management initiatives should mitigate these increases.
Maintain HOLD
Given its earnings stability, efficient management and healthy dividends, SATS has remained attractive to defensive, yield-hungry investors and its share price has added on another ~3% since its 3Q13 results. However, although we are encouraged by its prospects, valuations at this juncture remain expensive as many of the positives have already been priced in. Therefore, we maintain our HOLD rating on SATS but raise our fair value to S$3.15 (S$2.80 previously) by increasing our peg to 18.5x 12-month forward PE (from 16.5x).
SATS’s FY13 results were in line with our expectations with revenue growing 7.9% YoY to S$1,819m while operating profit increased correspondingly by 13.8% YoY to S$192.3m. SATS was also able to overcome operating cost pressures and recorded an improvement of 0.6ppt in operating margin to 10.6% from a year ago. Management declared a final and special cash dividend of 6 S cents and 4 S cents, respectively, to bring the total dividends declared in FY13 to 15 S cents (FY12 total: 26 S cents), representing a payout ratio of 90.3% of PATMI.
Broad-based demand improvements
The group experienced improvements across the various aviation-related metrics such as passengers, flights handled and meals produced, which all saw healthy growth rates for FY13. More encouragingly, the cargo handling segment saw a slight pickup in 4Q13 to narrow the overall FY13 slide to only 2.8% YoY. In terms of its overseas segments, TFK continued to turn in positive performances following additional contract wins
FY14 outlook positive
We expect the sustained growth of Intra-Asia passenger traffic to provide a conducive environment for the group in FY14. Although operating pressures still remain (i.e. staff and raw material costs), SATS’s ongoing cost management initiatives should mitigate these increases.
Maintain HOLD
Given its earnings stability, efficient management and healthy dividends, SATS has remained attractive to defensive, yield-hungry investors and its share price has added on another ~3% since its 3Q13 results. However, although we are encouraged by its prospects, valuations at this juncture remain expensive as many of the positives have already been priced in. Therefore, we maintain our HOLD rating on SATS but raise our fair value to S$3.15 (S$2.80 previously) by increasing our peg to 18.5x 12-month forward PE (from 16.5x).
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