SATS: Has signed a new JV agreement with Eastern Air Catering Invt, China Southern Airlines Co and Capital Airports Holding Co for Beijing Airport ground services (BGS) and inflight kitchen (BAIK). Both JVs, BGS and BAIK have a 20 yr operating term which expires in 2014 and 2013 respectively with SATS currently having a 40% ownershipe and Capital Airports with the remaining 60%. The new agreement will include new JV partners (Eastern Air 30% stake, China Southern 30%) and dilute SATS' stake to 28% with remaining 12% held by Capital Airports.
This renewal agreement essentially also dilutes SATS earnings from Beijing but at least ensures income continuity. The Chinese govt has a majority stake in China Eastern (subsi of Eastern Air Catering). SATS is trading at expected yield of 4.5% with fwd P/E 16.2x
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