The outlook remains stable to positive. Key theme of air travel growth and demand for safe food remains intact. SATS will continue to reinvest capital in automation & technology, and in adjacent business lines through associates/JVs. Airlines are facing low yields, resulting in pricing pressure on SATS; but this may open up opportunities for SATS, as airlines could divest non-core businesses such as catering and ground handling.
Maintain Neutral; unchanged target price of S$5.08
We do not make any adjustments to our full year forecast for FY18e. Our target price gives an implied FY18e forward P/E multiple of 23.2x. This compares against the STI next 12-months forward P/E multiple of 14.9x.