SINGAPORE (June 14): UOB Kay Hian is maintaining its “hold” call on SATS with entry and exit prices of $4.75 and $5.05 respectively.
This follows a restructuring of SATS’ China-based pig-farming joint venture, Jilin JVCo with the arrival of new partners – Charoen Pokphand (CP) and Singbridge.
Due to the restructuring, SATS effective stake in Jilin will be diluted to 21% from 30%, while CP will own 65% and Singbridge 14%.
In addition, all three parties will contribute additional capital to the JV.
SATS’ additional investment in the JV is expected to rise to $23.3 million, comprising $4.5 million initial net investment during the restructuring and an additional $18.8 million 60% of SGIP’s share capital commitments to Jilin JVCo.
In a Wednesday report, analyst K Ajith said, “While SATS’ effective stake will be diluted to 21% from 30%, we view the entry of CP positively as it has extensive upstream and downstream food processing capabilities. This will allow SATS to control the supply chain and manage its own supply to provide safe and high quality food in China via its JV with Wilmar.”
Ajith also comments that SATS’ strategic investments in China will have the potential to expand and grow in other markets, such as the Phillippines, while still in the early stages.
As at 10.24am, shares in SATS are down 2 cents at $5.12.