CGS-CIMB Research analyst Lim Siew Khee has kept ‘add’ on SATS with an unchanged target price of $4.30 as the airport services provider posted earnings of $6.4 million for the 1QFY2022 ended June, reversing from its loss of $43.7 million in the same period last year.
The earnings, which included tax credits of between $3 million to $4 million and government relief of $45.5 million, surpassed Lim’s $4.4 million earnings estimate.
See also: SATS looking to buy central kitchens, cargo handling assets
The $6.4 million, she says, currently stands at 12% of her full-year forecast for SATS.
SATS’s revenue of $276 million, which stood 32% higher y-o-y, also came in 8% higher than Lim’s forecast due to stronger-than-expected contribution from gateway services.
However, Lim has cut her earnings per share (EPS) estimates for the FY2022 and FY2023 by 42% and 5% respectively due to the slight delay in the reopening of Changi due to the two Phase Two (Heightened Alerts) in May to June as well as July to August, as well as higher handling costs.
For more stories about where the money flows, click here for our Capital section
For the FY2024, Lim has upped her EPS estimates by 6% as she deems SATS a good candidate to benefit from the reopening of Changi in FY2022.
OCBC Investment Research (OIR) analyst Chu Peng has kept "buy" on SATS with a slightly lower fair value estimate of $4.80 from $4.84.
This is due to the lowered earnings estimates on account of a slower recovery due to the recent Phase 2 (Heightened Alerts). The fair value estimate also incorporates a slight environmental, social and governance (ESG) premium in her valuations.
In her report on July 23, Chu says she expects the company's non-travel business to remain its key revenue driver as the recovery of the travel industry may take some time.
"We continue to see SATS as a beneficiary of vaccine rollouts and gradual recovery of air travel. Looking ahead, SATS will continue to grow its non-travel business across Asia and look for acquisition opportunities e.g. cargo handling assets and central kitchens," she writes.
"SATS’s ESG shows improvement, largely driven by the addition of the new Community Relations which helps mitigate risks related to community conflict. SATS outperforms its peers with lower exposure to risk of accidents as it operates in Singapore, where data indicates accident rates are low. SATS also has strong health and safety policies which are reinforced with audits, and certified operation standards," she adds.
As at 4.30pm, shares in SATS are trading 1 cent higher or 0.3% up at $3.88, or 2.87 times P/B, according to CGS-CIMB’s estimates.
Photo: SATS
