SINGAPORE (June 15): OCBC is keeping its “hold” recommendation on SATS with $4.20 fair value estimate.

OCBC expects SATS to be a key beneficiary of strong tourist arrivals this year in Singapore.

SATS is the biggest catering and ground handling services provider at Changi Airport, handling close to 80% of the traffic, OCBC notes.

Data from the airport operator show that total traffic jumped 9.7% on-year in the January-to-April period, while aircraft movements rose 5.3%.

Singapore Tourism Board also reported that visitor arrivals by air grew 13.5% through the same period, driven mainly by visitors coming from China, Indonesia and Thailand.

“We expect SATS’s continuous efforts on tight cost management and productivity gains through adoption of new technology and relevant training for its employees will help sustain its operating margins,” says OCBC.

At 3.12pm, SATS shares are down 0.5% at $4.07, compared with a 0.2% fall in the Straits Times Index.