SATS

SATS: Reported 1Q12 results which saw bottom-line below expectations.
Rev at $382.1m, +22% yoy but -8% qoq, while net profit at $44.3m, -4% yoy and -16% qoq. Top line was supported by TFK consolidation. Excluding TFK, rev +7% yoy led gateway services (+9% yoy), inflight catering (+12% yoy) and non-aviation food solutions (+5% yoy).

Poor bottom-line partly affected by one-off write-back at TFK, excluding this underlying net profit fell 17% yoy to $37m as margins contracted to a long-term low. Going forward, mgt expects pressure on wages and food costs to persist but indicated scope for subsequent margin recovery. Tip UK rev to strengthen with seasonality and (gradual) aviation recovery in Japan should support TFK contributions. No further details regarding the CEO succession were provided.

At current price, valuations insufficiently attractive, with Co. trading at 14.4x FY12E P/E, slightly below its 15x 2-yr average while its near-term growth profile and operational outlook (with lack of positive catalysts) suggest upside from current share price may be limited, although share price could be supported by an attractive 5.2% div yield. Deutsche maintains Hold with $2.75 TP and BNP maintains Hold with $2.63TP.