DBS Vickers keeps SATS (S58.SG) at Buy with $3.13 target price; says 2Q results within expectations, with net profit +10.5% on year at $45.2 million on revenue +11% at $401.2 million. 

Notes EBIT off 4%, EBIT margin down 1.6 ppt on year, due to higher raw materials cost as food prices up due to poorer harvest, natural disasters; this mitigated by stronger Associates/JV contribution of $15.9 million (+51% on year). 

 

Outlook positive; notes “we are expecting a seasonally stronger 2H on further pick-up in activities on increased air travel, airlines yields/load factor improvement, as well as better contribution from SATS’s Daniel's food business. 

 

However, rising food prices could be a dampener on our earnings estimates” though effects will be minimised through SATS's diversified supply base.

 

Stock last down 1.0% at $2.86.