As phase three clinical trials for about 10 vaccines are currently underway, DBS Group Research believes that airline food caterer SATS will recover faster than expected.
The brokerage has upgraded the stock to a “buy” call from “hold” and raised its target price to $3.66 from $3.15 previously.
“We are advocating buying ahead of the recovery while valuations are attractive,” DBS analysts Alfie Yeo and Andy Sim write in note dated Oct 1.
According to DBS, two Covid-19 vaccines could be available by the first quarter of next year.
If that pans out, it could take another three-to-six months to manufacture, distribute and to inoculate the wider population, says the brokerage.
Travel demand should thereafter recover quickly and drive SATS's share price to re-rate, it adds.
In such a scenario, DBS reckons that mass travel could recover sooner to pre-Covid-19 levels that it previously anticipated.
The brokerage now expects a full year of mass-travel normalisation can begin in 2022.
This is much earlier than the International Air Transport Association’s projected recovery in 2024.
Given that, DBS expects SATS’s earnings to normalise in 2022 (FY23) by raising its forecast by 34%.
As at 12.33 pm, SATS was up 2 cents or 0.7% at $2.85 with 2 million shares changed hands.
