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Analysts mixed on SATS after 1Q loss, lower revenue

Jeffrey Tan
Jeffrey Tan • 2 min read
Analysts mixed on SATS after 1Q loss, lower revenue
On Aug 24, SATS recorded a net loss of $43 million on the back of lower revenue of $209 million as airlines saw a plunge in air travel.
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Analysts are mixed on the prospects of SATS, following the aviation caterer’s weaker set of results in 1QFY21.

Phillip Securities has maintained its “sell” rating for the stock with an unchanged target price of $1.95.

CGS-CIMB Research, however, has upgraded the stock to “hold” from “reduce” and raised its target price to $3.00 from $2.80 previously.

On Aug 24, SATS recorded a net loss of $43 million on the back of lower revenue of $209 million as airlines saw a plunge in air travel.

Phillip says there is no clarity of a “sustainable and material improvement” in air travel, which is likely to extend the company’s losses ahead.

“SATS has likely bottomed out operationally but we worry such listless conditions may persist for another three to four quarters,” Phillips’ head of research Paul Chew writes in a note dated Aug 25.

On the other hand, CGS-CIMB believes the worst could be over for SATS.

The brokerage points out that the company will benefit from improving cargo volume and the upcoming peak season from September to December.

Moreover, better freight rates on the back of stronger demand for perishable and medical supplies should bode well for the company, it adds.

“[Earnings before interest, tax, depreciation and amortisation] could improve sequentially,” CGS-CIMB head of research Lim Siew Khee writes in an Aug 25 report.

Still, CGS-CIMB has cut its FY21-23 earnings per share forecasts for the company by 2%-29%.

The brokerage says the lower forecasts are to reflect the weaker-than-expected performances by SATS' associates and slower recovery in the aviation sector.

As at 12.01 pm, SATS was up 4 cents or 1.3% at $3.12 with 9.6 million shares changed hands.

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