OCBC downgrades SATS back to 'hold' due to limited near-term upside

OCBC downgrades SATS back to 'hold' due to limited near-term upside

By: 
Michelle Zhu
11/01/19, 10:37 am

SINGAPORE (Jan 11): OCBC Investment Research is downgrading SATS back to “hold” while raising its fair value to $5.34 from $5.23 previously, after updating its cost of equity (COE) assumptions to factor in its latest share price rally.

This is because the research house sees diminishing upside in the near-term post SATS’s recent price appreciation, considering how trade tensions and weaker sentiment have impacted emerging market (EM) currencies and trade volumes.

To recap, SATS’s share price has risen by 6.2% to its Jan 10 closing price of $4.94 since OCBC upgraded the stock to “buy” last year on Nov 29.

This translates to a forward P/E of 20 times, which is close to SATS’s historical average over the last five years and implies a forecasted dividend yield of 3.9%.

In a Friday report, analyst Low Pei Han notes that operating statistics have been mixed for Changi Airport over Nov 2018, reflecting weaker growth figures compared to that of Jan-Nov 2017 versus 2016.

“Traffic growth at Changi Airport has a direct impact on SATS as we estimate SATS to handle about 80% of the traffic throughput there. In the longer term, the addition of Terminal 5 to Changi Airport (construction to begin 2020) will benefit SATS since it is the dominant ground handling provider at Changi Airport,” says Low.

“Competition in the airline industry may also continue to result in pricing pressures on SATS, though the lower oil price is a near-term reprieve for the industry,” she adds.

As at 10.35am, shares in SATS are trading flat at $4.94 or 21.7 times FY19F earnings.

Hyflux gets non-binding letter of intent from China suitor

SINGAPORE (June 15): Hyflux has received another non-binding letter of intent (LOI) for a potential investment in the group by an investor based in China. In a Friday night filing, Hyflux says the investor is a subsidiary of a state-owned enterprise in the industrial field which works on a global scale to provide comprehensive power services. “Other fields of expertise of the investor’s holding company include wind and solar energy solutions, nuclear industry, medical technology and agriculture,” says Hyflux. See: Rags-to-riches tale goes sour for Hyflux founder Olivia Lum Se....
Read More >>

Hong Kong suspends China extradition bill

(June 15): Hong Kong’s leader suspended efforts to pass a bill allowing extraditions to China, in a dramatic reversal that she said was necessary to restore order in the Asian financial hub and avoid further violence and mass protests. Carrie Lam, Hong Kong’s chief executive, announced the legislative “pause” at a news conference Saturday, even as activists asked hundreds of thousands of residents who marched in protest last weekend to return to the streets and demand her resignation. Lam acknowledged that debate had shattered a period of relative calm in the former British colony, ....
Read More >>

Chip Eng Seng in joint $47.5 mil investment of China distressed property company

SINGAPORE (June 15): Chip Eng Seng and controlling shareholder Haiyi Investment are jointly investing RMB240 million ($47.5 million) in a distressed property company based in Taicang city in Jiangsu province, China. Chip Eng Seng says the investment will enable the project company to discharge its outstanding liabilities such that its assets will be unsealed and restart a project involving the development and construction of a residential development on a land area of 38,000 sqm, with a gross floor area of 111,111 sqm. The project company, effective controlled by local shareholder Ren We....
Read More >>