SATS

UOBKayhian on 12 Feb 2014

FY14F PE (x): 19.4
FY15F PE (x): 18.3

3QFY14 earnings below expectation. 3QFY14 net profit was 11% lower than our estimates, while 9MFY14 net profit amounted to 66% of consensus estimate and 68% of ours’. Operating costs remained flat yoy as a 3.6% increase in staff costs was offset by lower depreciation. Operating margin fell 0.9ppt yoy to 9.0% while EBITDA margin fell 1.9ppt to 13.1% in 3QFY14.

Maintain HOLD with a lower target price of S$3.08. We continue to value SATS on a DDM basis but lowered our fair value from S$3.22 to S$3.08, following a cut in our dividend estimates. At our fair value, the stock offers a dividend yield of 5.1%. Suggested entry price is S$2.94, or a 10% net return.