SATS reported a 3.3% YoY decline in its 2QFY15 PATMI to S$47.1m on the back of a 2.2% drop in revenue to S$442.2m. For 1HFY15, revenue and PATMI which declined 1.0% and 4.7% YoY to S$877.4m and 90.4m formed 49.0% and 50.0% of our FY15 forecasts, respectively. We think the aviation industry will continue to be challenging, as airlines continue to rationalize capacity to match the slowing demand. In addition, the negative pressures arising from overcapacity of airline caterers at Narita Airport in Japan will continue to put a strain on Tokyo Flight Kitchen’s profitability as competition continues to intensify. We continue to think SATS will be able to maintain a decent level of dividend pay-out given its healthy balance sheet. However, with a challenging outlook and a change in analyst coverage, we roll forward to 17.5x target blended FY15/16F PER, which is 0.5x standard deviation above its 5-year historical average PER. Consequently, we derive a lower FV of S$2.92 (previous: S$3.20). With an attractive FY15F dividend yield of 4.5%, maintain HOLD on SATS.
2QFY15 results declined YoY but within expectation
SATS reported a 3.3% YoY decline in its 2QFY15 PATMI to S$47.1m on the back of a 2.2% drop in revenue to S$442.2m. The latter was largely attributable to weaker result from its Japan subsidiary Tokyo Flight Kitchen (TFK) as well as loss of contributions from its Australian subsidiary which was divested in Jul-14, resulting in a 4.7% YoY drop in 2QFY15 Food Solutions (FS) segment revenue. The decline was further aggravated by the weakening of Japanese Yen. For 1HFY15, revenue and PATMI which declined 1.0% and 4.7% YoY to S$877.4m and 90.4m formed 49.0% and 50.0% of our FY15 forecasts, respectively. The decline in FS segment revenue was partly offset by a 2.0% YoY increase in Gateway Services (GS) 1HFY15 revenue on the back of cargo tonnage growth in Singapore.
Outlook ahead remains challenging
We believe the aviation industry will continue to be challenging, as airlines continue to rationalize capacity to match the slowing demand. This resulted in YoY decrease for passengers, flights and unit services handled in 2QFY15. The main uplift in 3QFY15 came from cargo/mail processed as volume increased 5.6% YoY to 393.1k tonnes. SATS stated rising manpower costs remains a challenge but will accelerate its productivity improvement initiatives going forward. Profit after tax from overseas GS segment associates and JVs dropped 15.9% YoY for 1HFY15 to S$18m. In addition, the negative pressures arising from overcapacity of airline caterers at Narita Airport in Japan will continue to put a strain on TFK’s profitability as competition intensifies.
Lower FV; maintain HOLD
We continue to think SATS will be able to maintain a decent level of dividend pay-out given its healthy balance sheet. However, with a challenging outlook and a change in analyst coverage, we roll forward to 17.5x blended FY15/16F PER, which is 0.5x standard deviation above its 5-year historical average PER. Consequently, we derive a lower FV of S$2.92 (previous: S$3.20). With an attractive FY15F dividend yield of 4.5%, maintain HOLD on SATS.
SATS reported a 3.3% YoY decline in its 2QFY15 PATMI to S$47.1m on the back of a 2.2% drop in revenue to S$442.2m. The latter was largely attributable to weaker result from its Japan subsidiary Tokyo Flight Kitchen (TFK) as well as loss of contributions from its Australian subsidiary which was divested in Jul-14, resulting in a 4.7% YoY drop in 2QFY15 Food Solutions (FS) segment revenue. The decline was further aggravated by the weakening of Japanese Yen. For 1HFY15, revenue and PATMI which declined 1.0% and 4.7% YoY to S$877.4m and 90.4m formed 49.0% and 50.0% of our FY15 forecasts, respectively. The decline in FS segment revenue was partly offset by a 2.0% YoY increase in Gateway Services (GS) 1HFY15 revenue on the back of cargo tonnage growth in Singapore.
Outlook ahead remains challenging
We believe the aviation industry will continue to be challenging, as airlines continue to rationalize capacity to match the slowing demand. This resulted in YoY decrease for passengers, flights and unit services handled in 2QFY15. The main uplift in 3QFY15 came from cargo/mail processed as volume increased 5.6% YoY to 393.1k tonnes. SATS stated rising manpower costs remains a challenge but will accelerate its productivity improvement initiatives going forward. Profit after tax from overseas GS segment associates and JVs dropped 15.9% YoY for 1HFY15 to S$18m. In addition, the negative pressures arising from overcapacity of airline caterers at Narita Airport in Japan will continue to put a strain on TFK’s profitability as competition intensifies.
Lower FV; maintain HOLD
We continue to think SATS will be able to maintain a decent level of dividend pay-out given its healthy balance sheet. However, with a challenging outlook and a change in analyst coverage, we roll forward to 17.5x blended FY15/16F PER, which is 0.5x standard deviation above its 5-year historical average PER. Consequently, we derive a lower FV of S$2.92 (previous: S$3.20). With an attractive FY15F dividend yield of 4.5%, maintain HOLD on SATS.
No comments:
Post a Comment