SATS

SATS: Group's 70-30 JV Sports Catering Services (SCS) has been awarded a 21-year exclusive contract to provide catering and F&B services to the Singapore Sports Hub. Privately-owned Delaware North Companies, which is one of the world’s largest global hospitality companies, is the owner of the minority stake (30%) in the catering JV. SATS management forecasts steady-state revenues of $50m for SCS. The catering operations will begin from Apr 2014 onwards (ie, FY15). SATS’s expected pro rata share of steady-state revenues (~$35m) is ~1.5% of its FY15F revenues. Using the company’s existing net margins for the food business (~10%), Nomura estimate a steady-state profit contribution of $3.5m to SATS, which is not material. Nomura believe this new contract will not require a significant investment from SATS and are positive on this contract being an organic growth opportunity, albeit small. Nomura has a BUY rating, with TP of $3.10; House has an attractive forward yield of 5.4%, with SATS currently trading at 17x forward earnings.