SINGAPORE (June 4): UOB Kay Hian Research, DBS Group Research and Maybank Kim Eng Research are maintaining their “buy” calls on SATS, following the gateway services and food solutions provider’s release of its results for 4QFY2018 ended March. The company’s earnings declined 1.8% y-o-y to $65.4 million, driven partly by the sale of a 51% stake in SATS HK.

Both UOB and DBS have lowered their price targets on the stock — to $5.70 and $5.64, respectively, from $5.80 and $5.67 previously. Maybank KE has adjusted its price target upward to $6.15, from $6.10, on expectations of new ventures to drive the group’s growth over the next three to five years. 

In a May 31 report, UOB analyst K Ajith highlights the improvement of returns from joint ventures and associates as a key challenge for SATS going forward. The group intends to invest a substantial amount in these ventures. Ajith says, “We are also not confident that SATS’ gateway services JV with AirAsia Group will boost return on equity, given that operating margins for Malaysian ground services handlers amounted to just 4.6% in 2016. In comparison, SATS generated an operating margin of 10.1% in FY2018 for the gateway services division.”  

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