SATS

SATS: CS maintains O/p with $3.70 TP. House note that Premium class volumes for SIA (SATS’s biggest customer, ~40% of revenues) might be at an inflection point, driven by a revival in corporate travel. This could mean better volumes and margins for SATS’s food solutions business. Japan (18% of revenues) prospects continue to be intriguing. After hitting an all-time high for visitor arrivals in April, the momentum should continue into the 2Q-3Q holiday season. The medium-term prospects could get a big boost from PM Abe’s Third Arrow plan to triple tourist volumes: from 8.3m in 2012 to 25m by 2020. While outlook for cargo remains cloudy, it contributes only ~20% of revenues. The near-term upside potential for food solutions (64% of revenues) driven by recovery in corporate travel and Japan can more than offset the drag from cargo weakness. The grp provides a defensive dividend yield of around 5%+.