SATS

UOBKayhian on 7 Mar 2014

FY14F PE (x): 17.8
FY15F PE (x): 16.6


Increasing exposure in Indonesia via acquisition. SATS’ acquisition of 41.7% of PT
Cardig Aero Servces (PT CAS) will give it exposure to the Indonesian inflight catering,
ground handling, line maintenance sectors. This is underscored by the fact that PT CAS’
9M13 revenue and net profit grew at substantially faster rates than SATS’. PT CAS’ pre-
tax margin at 26.2% was also 14ppt higher than SATS’ although the ground handling,
line mat former’s net margin was 2.2ppt lower at 8.0% due to the higher tax rate in
Indonesia. PT CAS’ dividend payout ratio at 34.3% was lower than SATS’ 90%.
Maintain HOLD with a lower target price of S$3.03 (from S$3.08), based on DDM basis,
as we account for lower cash following the acquisition. At our fair value, the stock will
offer a dividend yield of 5.1%. Suggested entry price is S$2.90, or a 10% required
return.