SATS

SATS: Announced 1Q14 results which was in-line. Rev at $434.5m, -1% y/y while net profit at $46.2m, +12% y/y. Revenue for Gateway Services was $167.9m, (+8% y/y, +2% q/q) helped by a 9% y/y and 6% y/y growth in flights and passengers respectively. This was also helped by continuing momentum in signing and renewing contracts with existing and new custom Food Solutions at $265.2m, (-6%. y/y, -6% q/q) mainly due to loss of business from Qantas’s move to Dubai hub for Kangaroo routes and lower load factors in airlines. The performance of TFK in Japan was also weak due to lower traffic, weaker Yen. Management also commented that although TFK is operationally profitable, the profits have contracted from an already anemic $2m EBIT last year. Yet operating profit for the quarter at $40.7m, +3.6% y/y, largely attributed to the cost saving initiatives undertaken by the Group. Associates and JVs also contributed positively at $12.5m, + 6.8% y/y At current price, the grp has a fairy attractive yield of 4.6%. Nomura maintains neutral with $3.40 TP