As CGS-CIMB Research expects SATS to return to profitability soon, the brokerage has upgraded the in-flight caterer to an “add” rating from “hold” with a higher target price of $4.30 from $3.27 previously.
This is despite the slow recovery in inflight catering volume.
SATS is expected to release its 3QFY2021 results ended Dec 31 on Feb 10.
According to CGS-CIMB, SATS is forecast to register earnings of $3.5 million in the upcoming quarterly results compared to a loss of $33 million in 2QFY2021.
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The improved bottom line, it says, will be driven by the company’s strong cargo revenue and the Job Support Scheme dished out by the Singapore government.
“We believe structural acceleration in e-commerce and a new norm due to Covid-19 would create a continuous demand for medical supplies, which could form a new baseload for SATS’s cargo handling division,” CGS-CIMB’s head of research Lim Siew Khee writes in a note dated Feb 1.
However, “normal” travel may not resume until 2023 or 2024, warns the brokerage.
As such, CGS-CIMB has forecast SATS’s inflight catering to recover to 49% of FY2019 level by 4QFY2023.
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In the meantime, CGS-CIMB reckons that the company could start to accelerate its merger and acquisition efforts given its stabilising cargo business and strong cash position.
SATS’s last acquisition target was Monty’s Bakehouse, an innovative sustainable packaging company, the brokerage notes.
As at 11.36 am, SATS was up 8 cents or 2.1% at $3.93 with 1.2 million shares changed hands.
