SATS

SATS: proposed disposal of 40% stake in Adel Abuljadayel Flight Catering Co (AAFC) for US$18.4m (~$23.4m) cash. This compares with the Mar ‘13 book value and NTA of the sale shares of $24.1m and $4.8m respectively. The transaction is not expected to have any material impact on the NTA/sh and EPS for the current financial year. SATS has reviewed its invmt in AAFC and believes the proposed transaction is in its interests as it continues to pursue other attractive invmt opportunities in the Middle East region. The co remains focused on leveraging its core competencies in gateway and food to access suitable opportunities and grow its presence in this mkt. According to latest data from Changi, passenger traffic in May rose 4.7% yoy to 4.28m. This represents a recovery from Apr’s muted 0.8% increase (partly boosted by the Good Friday holiday this year). Pax growth was supported by firm intra-Asia traffic demand, with Japan, Msia, Thailand registering double digit increases. Deutsche expects traffic to pick up further in Jun, reflecting the school holidays. Also notes 2H tends to be seasonally stronger for SATS. Hence while SATS may have had a fairly subdued start to its FYMar14, the house maintains its view of a 7% increase in pax handled for the full year. Reiterates Buy with TP $3.54, supported by dividend yield of up to 8% pa over 5 yrs (under a blue skies scenario of no M&A and gradual increase in gearing).