SATS will acquire Singapore Cruise Centre (SCC) from Temasek for S$110m. This acquisition will complement SATS's existing cruise services at the Marina Bay Cruise Centre, and give it control of the ferry terminals at Tanah Merah, Pasir Panjang, and HabourFront Centre, which has an anchor client in the form of the popular Star Cruises. We view the deal favourably as it is cash generative (SCC had revenue of S$45m and PBT of S$16.7m in FY13), should enhance SAT’s FY14F EPS by at least 5%, and will provide growth opportunities for its gateway and food solution businesses. We raise our fair value estimate to S$3.35 (S$3.10 previously) but maintain our HOLD rating on the counter as we foresee limited upside at this point.
S$110m acquisition of Singapore Cruise Centre
SATS will acquire Singapore Cruise Centre (SCC) from Temasek for S$110m. This acquisition will complement SATS's existing cruise services at the Marina Bay Cruise Centre, and give it control of the ferry terminals at Tanah Merah, Pasir Panjang, and HabourFront Centre, which has an anchor client in the form of the popular Star Cruises.
Building a comprehensive service suite
We view the deal favourably as it is cash generative (SCC had revenue of S$45m and PBT of S$16.7m in FY13), should enhance SAT’s FY14F EPS by at least 5%, and will provide growth opportunities for its gateway and food solution businesses. According to the SCC, the HarbourFront terminal sees more than 4.5m passengers each year (~8% of annual passenger movements at Changi Airport), and it recently underwent a S$14m rejuvenation in 2011 to increase available space by 25% so we do not foresee any significant outlay by SATS in this regard in the medium-term. In addition, SATS already provides seam-less check-in services for air-sea transfer passengers so this deal should help to further advance this initiative.
Transaction funded internally
SATS will fork out S$106.5m in cash and have an effective ownership stake of 96.8% in SCC (remainder is owned by its JV SATS-Creuers, which operates the Marina Bay Cruise Centre). However, SATS has granted SATS-Creuers a call option to purchase 42.3% of SCC, and if exercised by 31 Mar 2014, SATS will have a diluted ownership stake of 79.9%.
Positive boost but upside limited
We raise our fair value estimate to S$3.35 (S$3.10 previously) but maintain our HOLD rating on the counter as we foresee limited upside at this point as ongoing tapering expectations will have a negative impact on dividend-yielding counters like SATS.
SATS will acquire Singapore Cruise Centre (SCC) from Temasek for S$110m. This acquisition will complement SATS's existing cruise services at the Marina Bay Cruise Centre, and give it control of the ferry terminals at Tanah Merah, Pasir Panjang, and HabourFront Centre, which has an anchor client in the form of the popular Star Cruises.
Building a comprehensive service suite
We view the deal favourably as it is cash generative (SCC had revenue of S$45m and PBT of S$16.7m in FY13), should enhance SAT’s FY14F EPS by at least 5%, and will provide growth opportunities for its gateway and food solution businesses. According to the SCC, the HarbourFront terminal sees more than 4.5m passengers each year (~8% of annual passenger movements at Changi Airport), and it recently underwent a S$14m rejuvenation in 2011 to increase available space by 25% so we do not foresee any significant outlay by SATS in this regard in the medium-term. In addition, SATS already provides seam-less check-in services for air-sea transfer passengers so this deal should help to further advance this initiative.
Transaction funded internally
SATS will fork out S$106.5m in cash and have an effective ownership stake of 96.8% in SCC (remainder is owned by its JV SATS-Creuers, which operates the Marina Bay Cruise Centre). However, SATS has granted SATS-Creuers a call option to purchase 42.3% of SCC, and if exercised by 31 Mar 2014, SATS will have a diluted ownership stake of 79.9%.
Positive boost but upside limited
We raise our fair value estimate to S$3.35 (S$3.10 previously) but maintain our HOLD rating on the counter as we foresee limited upside at this point as ongoing tapering expectations will have a negative impact on dividend-yielding counters like SATS.
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