The outlook is positive. Despite the pricing pressure from airlines, we see future earnings growth for SATS, as it continues to make investments and form new partnerships in associates/JVs. SATS is leveraging on its core competencies to tap on growth in passenger and cargo traffic.
Downgrade to Neutral (from Accumulate); higher target price of $5.33 (previously $5.23)
We like the stock for its regional expansion story and pipeline of growth initiatives, but our rating downgrade is on the belief that the market has adequately priced in the growth prospects. Our target price gives an implied FY18e forward P/E multiple of 23.3 times. We would turn buyers of the stock on any opportunistic price weakness.
Management shared updates to some of the overseas ventures.
Gateway Services JV with AirAsia
Food Solutions JV with Turkish Airlines (THY) at Istanbul New Airport
Cargo concession at Mumbai Airport