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Sats
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Joelton
Supreme |
11-Jan-2024 10:31
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UOB Kay Hian keeps &lsquo buy&rsquo call on SATS, expects recovery via increased travel and cargo
UOB Kay Hian analyst Roy Chen is maintaining his &ldquo buy' ' call on Singapore Airport Terminal Services (SATS) with an unchanged target price of $3.22, as he expects the group&rsquo s earnings recovery to gain traction for the FY2024 ended March 31, driven by the continued recovery in air traffic and growth in global air cargo demand.
Chen&rsquo s target price is based on 16.8 times SATS&rsquo s FY2026 price-to-earnings ratio (P/E), and is 1 standard deviation (s.d.) below SATS&rsquo s historical mean P/E of 19.9x.
He writes: &ldquo The 1 s.d. reduction P/E peg takes into account the likely higher margin of error for our FY2026 (normalised year) earnings forecast.&rdquo
In his Jan 10 report, the analyst notes that compared to other Singapore aviation players, SATS has been a &ldquo laggard&rdquo in terms of earnings recovery.
Tailwinds
However, Chen expects the group&rsquo s recovery momentum to gain speed in FY2024, as visa-free agreements between China with Singapore, Malaysia and Thailand look to usher the return of Chinese tourists to the region, in turn spurring regional air traffic and correspondingly, SATS&rsquo s inflight catering and flight handling businesses.
See also: Maybank lifts Genting Singapore&rsquo s TP to $1.21 following en masse return of Chinese tourists
&ldquo In addition, with an already more or less stabilised headcount ramp-up, operating leverage should also kick in and help SATS&rsquo earnings recovery. We forecast SATS&rsquo s FY2025 net profit at $158 million, a 283% y-o-y growth from FY2024&rsquo s low base of $41 million, and project SATS&rsquo s earnings to rise further to $285 million in FY2026,&rdquo notes Chen.
Due to the pausing of shipments through the Red Sea and forced re-routing via the Cape of Good Hope following attacks from rebels in the area, the analyst also views the Red Sea crisis as a potential catalyst for air cargo.
This should benefit SATS and provide &ldquo support&rdquo to the group&rsquo s cargo performance in the seasonally quieter 4QFY2024.
He explains: &ldquo About 12% of global trade and 30% of global container traffic pass through the Red Sea. The rerouting adds 3,000 to 3,500 nautical miles and at least 10 days of transit time to the journey.&rdquo
&ldquo Given SATS&rsquo s large air cargo handling business presence in Europe via Worldwide Flight Services (WFS), we reckon that SATS is likely a beneficiary from the increasing demand for air cargo,&rdquo continues Chen.
With favourable tailwinds, the analyst forecasts SATS&rsquo s 3QFY2024 net profit at $25 million to $35 million, a &ldquo meaningful&rdquo q-o-q improvement from 2QFY2024&rsquo s headline net profit of $22.1 million or 3QFY2023&rsquo s &ldquo thin&rdquo profit of $0.5 million.
Chen writes: &ldquo We expect q-o-q earnings improvement to be partly driven by better business volume, which is helped by the strong seasonality, due to the year-end holiday travels.&rdquo
Cargo flow
The healthy expectations for SATS&rsquo s 3QFY2024 earnings have also come about via the International Air Transport Association (IATA) forecasting a 4.5% y-o-y growth for global air cargo demand in FY2024.
According to data from the IATA, after 19 consecutive months of y-o-y declines, global air cargo demand finally returned to positive territory in August 2023 with a y-o-y growth of 1.5%, followed by a consecutive 1.9% growth in September and 3.8% growth in October.
For more stories about where money flows, click here for Capital Section
Although numbers for November and December 2023 have not been published yet, logistics data vendor, Xeneta, point to y-o-y global air cargo demand growth rates of 5% y-o-y for the former and 9% for the latter.
Notably, SATS has a presence in Hong Kong International Airport (HKIA) via its 65.4% subsidiary, Asia Airfreight Terminal (AAT), which handles about 20% to 30% of HKIA&rsquo s cargo throughput.
Chen expands: &ldquo HKIA&rsquo s air cargo volume rose 10.0%, 12.1% and 17.8% y-o-y in September, October and November 2023 respectively.&rdquo
In FY2023, prior to the consolidation of Worldwide Flight Services (WFS), AAT contributed $119.2 million revenue to SATS, which the analyst characterises as &ldquo one of the worst-performing&rdquo compared to the normal estimated revenue of $150 million.
Despite this, AAT&rsquo s contribution formed around 37% of SATS&rsquo s cargo.
Key risks noted by Chen include a slower-than-projected earnings recovery trajectory and continued integration risks between SATS and WFS.
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spore1
Supreme |
08-Jan-2024 22:15
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Huat ah! 3.00 should be possible
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monkey80
Member |
08-Jan-2024 17:35
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Looks easy hit $3 | ||||
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RL16EGG
Veteran |
08-Jan-2024 15:23
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The problem is when one looks at this stock, one sees p/e, eps and dividend yield " NA" . Price 2.81, nav 1.56 giving p/b 1.79. This stock is for more long term considering its busines model with ah gong support. Just my view. |
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ruanlai
Elite |
08-Jan-2024 15:00
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https://www.zaobao.com.sg/finance/singapore/story20240105-1460255 |
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SmallSmall
Supreme |
08-Jan-2024 14:04
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Above $2.80 liao and no one talking about it. Good sign indeed. Likely to trend towards $3.00 this round I hope... |
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lsyiat
Veteran |
29-Dec-2023 12:01
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Red Sea Crisis: Shipping industry association warns rerouting may spike costs by 80%https://www.hellenicshippingnews.com/red-sea-crisis-shipping-industry-association-warns-rerouting-may-spike-costs-by-80/#:~:text=The%20rerouting%20of%20ships%20to,to%2080%25%20in%20shipping%20costs. |
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lsyiat
Veteran |
29-Dec-2023 10:23
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I believe recent attacks in the Red Sea will ultimately benefit a customer shift from sea cargo to air cargo
Potential benefits of shifting to air cargo:
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Joelton
Supreme |
06-Dec-2023 16:41
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Sats says it remains on track to restoring profitability
IN-FLIGHT caterer and ground handler Sats : S58 0% on Tuesday (Dec 5) said it remains on track to restore profitability, a week after it filed its notice of three consecutive years of losses.
The group was responding to media articles detailing the notice, its US$3 billion multicurrency debt issuance programme and the uncommitted bilateral facilities it has obtained.
In its clarification, the group cited factors including the global travel recovery, new contract wins, operational efficiencies and synergies achieved through the integration with Worldwide Flight Services.
It reiterated that there is no risk of being placed on the watch list, as its six-month average daily market capitalisation stood at S$3.9 billion.
Based on SGX listing rules, mainboard-listed companies will be placed on the watch list if they record pre-tax losses for the three latest consecutive financial years and fail to maintain an average daily market cap of at least S$40 million over the last six months.
As for its funding programmes, the group said its S$3 billion multicurrency debt issuance programme will provide flexibility for the group to access global debt markets to optimise its borrowing costs through appropriate maturity tenure.
It noted that it continues to generate positive net operating cash flow on the back of global travel recovery and good progress on its integration with WFS.
Its newly obtained uncommitted bilateral facilities were also the result of the group restructuring WFS&rsquo existing revolving credit facilities, which had certain restrictive covenants in place.
Sats had restructured these facilities with ING Bank, MUFG Bank, Bank of America and HSBC Bank to remove these restrictive covenants and provide the group with greater funding flexibility, the group said.
It added that it will continue to maintain a prudent financial management strategy, as well as focus on delivering stable financial performance and increasing shareholder value.
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Joelton
Supreme |
02-Dec-2023 11:30
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Sats bags new uncommitted bilateral facilities worth $204.5 million to generate cost savings
SINGAPORE - In-flight caterer and ground handler Sats on Dec 1 reported that it, along with its units, has secured uncommitted bilateral facilities to help it deal with the cancellation of an older revolving credit facility.
These facilities will also help the group streamline its treasury, banking and financial management and continue to generate cost savings, the company said in an announcement on the bourse.
In Singapore dollar terms, these facilities add up to $204.5 million, based on current exchange rates.
Sats&rsquo indirect wholly owned unit Worldwide Flight Services (WFS) Global was granted uncommitted bilateral facilities totalling &euro 25 million (S$36.4 million) by ING Bank, subject to the terms and conditions of a master agreement of guarantees and letters of credit between the two parties.
WFS Global has also been granted similar facilities by MUFG Bank amounting to &euro 33 million, subject to the terms and conditions of a framework agreement for the issuance of guarantees entered into by the two parties, Sats said.
WFS, an indirect wholly owned unit of Sats, has also been granted uncommitted bilateral facilities totalling US$30 million by the Bank of America, subject to the relevant terms and conditions set out in the uncommitted line of credit letter.
Under the corporate guarantees that it has entered into with the three parties, Sats guarantees to pay and satisfy the relevant lender on demand the due and punctual payments of all sums of money, obligations or liability, as well as all costs, charges and expenses which the respective lender may incur in enforcing or seeking to obtain payment or performance of all or any part of the money, liabilities or obligations guaranteed by Sats.
The group also noted that it has secured uncommitted bilateral facilities from HSBC Singapore to the tune of $80 million, comprising working capital and guarantee or bond limits.
It added that it also has existing uncommitted banking facilities of about $500 million obtained from various lenders in the past.
Prior to Sats&rsquo acquisition of WFS Group on April 3, the company&rsquo s indirect wholly owned unit Neptune Holdings maintained a revolving credit facility of &euro 160 million for the working capital and standby letter of credit requirements for the WFS Group.
In June, Sats completed a liability management exercise to redeem and refinance certain floating rate notes and senior secured notes of Neptune Holdings (then known as Promontoria Holding) in full.
The revolving credit facility was, as a result, partially cancelled, Sats said.
In order to cancel WFS Group&rsquo s revolving credit facility fully and remove the restrictive covenants, Sats noted that it has restructured the existing standby letter of credit lines to uncommitted bilateral facilities with certain of the lenders under the WFS Group facility.
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pikachu
Master |
02-Dec-2023 07:10
Yells: "Holy Cow!" |
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Environment is challenging lah. Must be patient. | ||||
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Battle123
Elite |
01-Dec-2023 22:10
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Nxt week can chiong !
27x series Dyodd |
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leroy55
Veteran |
28-Nov-2023 09:45
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complain to MP and scholar
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lsyiat
Veteran |
28-Nov-2023 09:25
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Plz project stock prices 6 months in advance
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iinvestor
Veteran |
27-Nov-2023 15:55
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3 years of losses....like @^#^#%! Still stuck in covid era and hopelessly in debt. | ||||
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lsyiat
Veteran |
27-Nov-2023 15:23
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i mean the purpose the coy posting this news, serve no purpose at all
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leroy55
Veteran |
27-Nov-2023 13:44
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its not old news. its morning news. why the work out?
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lsyiat
Veteran |
27-Nov-2023 11:45
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what is the purpose telling old news?
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Joelton
Supreme |
27-Nov-2023 11:32
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Sats files notice of 3 straight years of losses
IN-FLIGHT caterer and ground handler Sats has given notice that it has recorded three consecutive years of losses.
Based on audited full-year consolidated accounts, the mainboard-listed group recorded pre-tax losses for the last three consecutive financial years, it said in a bourse filing on Sunday (Nov 26).
However, Sats will not be placed on the Singapore Exchange (SGX) watch list, as its six-month average daily market capitalisation was nearly S$3.9 billion as at Nov 23.
According to rules under SGX&rsquo s listing manual, mainboard-listed companies will be placed on the watch list if they record pre-tax losses for the three latest consecutive financial years, and if they fail to maintain an average daily market cap of at least S$40 million over the last six months.
On Nov 10, Sats released its results for the first half of FY2024 ended September, posting a net loss of S$7.8 million.
This was a narrowing from its net loss of S$32.5 million in the corresponding year-ago period.
For the second quarter of the financial year, Sats posted a net profit of S$22.2 million &ndash its first earnings without government relief since the Covid-19 pandemic struck in early 2020.
It had posted a net loss of S$29.9 million for Q1.
The improvement in financial performance in Q2 came on the back of a year-on-year increase in the top line of about 7 per cent, to about S$1.3 billion. Management attributed the better quarterly performance to an increase in business volumes, yield management as some cost increases have been passed on to customers, and productivity enhancements.
As at the end of September 2023, flights handled and in-flight meals served returned to 82 per cent and 83 per cent of pre-Covid levels, respectively.
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Joelton
Supreme |
20-Nov-2023 13:46
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Sats to borrow US$3b under multi-currency debt issuance programme
IN-FLIGHT caterer and ground handler Sats announced on Sunday (Nov 19) that it has established a US$3 billion multi-currency debt issuance programme.
The company said that the net proceeds from the programme will be used to refinance existing borrowings, finance potential acquisition and investment opportunities as well as working capital and capital expenditure requirements and other general corporate purposes.
Under the programme, DBS and OCBC will act as joint arrangers and dealers, with OCBC acting as the sole rating adviser for the credit rating exercise.
In a bourse filing, the company said that it could issue notes and perpetual securities denominated in any currency. Each series or tranche of notes may also be issued in different amounts and tenors, and may bear interest at fixed rate, floating rate, or zero coupon.
The notes issued as part of the programme will constitute direct, unconditional, unsubordinated and unsecured obligations of the company.
Meanwhile, the perpetual securities may bear fixed or floating rates of distribution and may have distributions deferred by the company if the pricing supplement provides for this.
Sats also noted that Moody&rsquo s has assigned the company with an A3 issuer rating and a baa3 baseline credit assessment. A provisional (P)A3 rating has also been assigned to the programme and is only applicable to the issuance of senior unsecured notes from the programme.
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