SATS Ltd’s (SATS) reported a strong set of 2QFY13 financial results that beat our and market expectations. SATS’s aviation-related segments led revenue growth while effective cost management initiatives helped to improve margins. Similar to last year, SATS also declared an interim dividend of 5 S cents. While the macro-environment remains uncertain, we are positive about SATS’s performance in 2H13. Competition amongst airlines to stimulate passenger demand could prove supportive for the group going forward. In addition, cost pressures arising from higher staff costs could face some relief from easing food inflation. After tweaking our estimates slightly, our fair value estimate increases from S$2.55 to S$2.65. However, we maintain our HOLD rating on account of its recent 7.4% share appreciation since going ex-dividend on 31 Jul. Even if we include our FY13 dividend forecast, our valuation on a total return basis provides an upside of 3.2% only.
2Q13 results beat consensus
SATS Ltd’s (SATS) reported a strong set of 2QFY13 financial results that beat our and market expectations (+5% and +12% for top and bottom-lines respectively). Although revenue closely matched our quarterly estimates at S$461.5m (+8.8% YoY), PATMI exceeded our forecasts by 10% to S$50.3m (+25.4% YoY) following better cost management despite higher staff costs and raw material price pressures. SATS also declared an interim dividend of 5 S cents, which was an identical amount for the same period last year.
Cost management kept operating expenses subdued
Despite experiencing raw material cost pressures and a significant 10.4% YoY increase in staff costs (due to headcount additions and workforce-related statutory fees), SATS managed to keep operating costs subdued with operating margins improving from 10.7% in 2Q12 to 11.3% for 2Q13. Productivity and cost saving initiatives e.g. the procurement of raw materials directly from suppliers, reduction in wastage and better menu deployment were the reasons behind the improvements.
Outlook is encouraging
While the macro-environment remains uncertain, competition amongst airlines (i.e. promotional fare strategies) to stimulate passenger demand could prove supportive for the group going forward. Revenue growth should also continue unabated on the back of additional contract wins and TFK’s stabilization following the recovery from last year’s natural disasters. Although some weaknesses will persist – particularly in the cargo segment and associate performance in West Asia – we deem their negative contributions to be negligible when considered in the context of the main aviation operating segment.
Maintain HOLD given recent stock appreciation
On the back of a higher EPS, our fair value estimate increases from S$2.55 to S$2.65 whilst maintaining a P/E multiple of 15.5x. However, we maintain our HOLD rating on account of its recent 7.4% share appreciation since going ex-dividend on 31 Jul. Even if we include our FY13 dividend forecast, our valuation on a total return basis provides an upside of 3.2% only.
SATS Ltd’s (SATS) reported a strong set of 2QFY13 financial results that beat our and market expectations (+5% and +12% for top and bottom-lines respectively). Although revenue closely matched our quarterly estimates at S$461.5m (+8.8% YoY), PATMI exceeded our forecasts by 10% to S$50.3m (+25.4% YoY) following better cost management despite higher staff costs and raw material price pressures. SATS also declared an interim dividend of 5 S cents, which was an identical amount for the same period last year.
Cost management kept operating expenses subdued
Despite experiencing raw material cost pressures and a significant 10.4% YoY increase in staff costs (due to headcount additions and workforce-related statutory fees), SATS managed to keep operating costs subdued with operating margins improving from 10.7% in 2Q12 to 11.3% for 2Q13. Productivity and cost saving initiatives e.g. the procurement of raw materials directly from suppliers, reduction in wastage and better menu deployment were the reasons behind the improvements.
Outlook is encouraging
While the macro-environment remains uncertain, competition amongst airlines (i.e. promotional fare strategies) to stimulate passenger demand could prove supportive for the group going forward. Revenue growth should also continue unabated on the back of additional contract wins and TFK’s stabilization following the recovery from last year’s natural disasters. Although some weaknesses will persist – particularly in the cargo segment and associate performance in West Asia – we deem their negative contributions to be negligible when considered in the context of the main aviation operating segment.
Maintain HOLD given recent stock appreciation
On the back of a higher EPS, our fair value estimate increases from S$2.55 to S$2.65 whilst maintaining a P/E multiple of 15.5x. However, we maintain our HOLD rating on account of its recent 7.4% share appreciation since going ex-dividend on 31 Jul. Even if we include our FY13 dividend forecast, our valuation on a total return basis provides an upside of 3.2% only.
No comments:
Post a Comment