SATS: OCBC Sec keeps at Buy but cuts target to $2.87 from $3.31 as stock has declined 9% since 3Q11 results, weighed by concerns over food price inflation & threat of a 3rd ground handler. House believes these risks have been adequately priced in with the stock trading close to its 52-wk low…
Reckons investors have overlooked SATS investment merits, which include positive earnings growth (driven .by aviation demand recovery, Spore's robust tourism landscape & healthy 5.5% dividend yield….
While there are near term risks from higher operating costs & stiffening competition, SATS' pass-through cost structures should alleviate food inflation concerns in the medium term. Also, threat of a 3rd ground handler may not be as daunting if the new license pertains to a specific segment of services.
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