The outlook remains stable to positive. We see credible earnings growth as SATS continues to make investments in associates/JVs. In our previous report, we mentioned the possibility of airlines divesting non-core businesses such as catering and ground handling. SATS has announced partnerships with AirAsia and Turkish Airlines (see overleaf). We view this positively, as they give SATS exposure to markets far larger than the domestic volumes at Changi Airport.
Upgrade to Accumulate (from Neutral); higher target price of $5.23 (previously $5.08)
We incorporate 1H18 results into our FY18e estimates and raise our outlook assumptions for associates/JVs by 12% to 17%. Our target price gives an implied FY18e forward P/E multiple of 23.2x, and forward P/E multiple of 21.7x FY19e earnings. We like the stock for its regional expansion story. SATS is building partnerships today outside of Singapore, that will bear fruit in later years.
Management shared some insights to the recent two announcements of overseas ventures with airlines.
Formation of Gateway Services JV with AirAsia
Memorandum of agreement (MOA) with Turkish Airlines (THY) for Food Solutions JV at Istanbul New Airport