SINGAPORE (Nov 5): OCBC is maintaining its “hold” call on SATS with $3.78 fair value as operational improvements have resulted in higher margins and the house expects stable growth ahead.

In 2Q16, SATS says PATMI grew 26.8% y-o-y to $59.7 million despite a 4.2% decline in revenue to $422.7 million. However, 2Q operating margin improved by 4.4ppt to 14% as efforts to manage costs and drive productivity led to a 9.1% decline in operating expenses across all expense categories.

2Q net margin rose 3.4ppt y-o-y to 14.1%, helped by a 10.2% increase in contribution from overseas associates and JVs to $11.9 million.

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