SATS

SATS: 2QFYMar12 results slightly below consensus.
Revenue was $424.2m, +32% yoy, +10% qoq, with the loss of the UK contributions (from Daniels) offset by consolidation of TFK. Excluding both UK and TFK, underlying revenues were up 8% yoy, as aviation gains offset a contraction in non-aviation food solutions.
Reported net profit was $40.1m, -11% yoy, -6% qoq, due to lower margins, lower Associate contribution (fell 16% yoy to $13.3m on weaker cargo volumes from N and SE Asia), and a higher effective tax rate.
EBITDA margins fell to 16.1% from 18.5% yoy, with costs of raw materials and utilities continuing to rise.

Following the divestment of Daniels (for $321m), SATS is sitting on $450m in cash, though the Street is mixed on what SATS will do with this. BNP tips potential special dividend, while CIMB says prospect of a special div is overhyped and mgt may prefer to keep the proceeds for M&A opportunities, since it has to seek new growth avenues now that it has lost a stream of recurring income.

Nevertheless, Street views are generally not bullish.
Deutsche, BNP have Hold ratings with TP $2.33, $2.55 rptvly.
CIMB rates at Underperform, cuts TP to $1.73 from $2.24.