CIMB: SATS sharp rally may be on reports stakeholder Temasek eyeing Swissport, Gategroup stakes

Singapore Changi Airport Terminal 4 departure boardSingapore Changi Airport Terminal 4 departure board

SATS shares have climbed this week, and CGS-CIMB is pointing at a report that Temasek is considering buying stakes in two unrelated airlines services companies.

The stock rose 1.15 percent on Tuesday, and another 3.42 percent on Wednesday, with volume strong on both days. Shares were up another 0.55 percent at S$5.48 at 2:09 P.M. SGT on Thursday.

CGS-CIMB pointed at a report that Temasek was considering taking stakes in HNA-owned ground and cargo handling services company Swissport and airline catering company Gategroup, with a deal possible by the third quarter of this year. Both companies recently had their initial public offering (IPO) plans delayed.

“Given Temask’s around 40 percent stake in SATS, the market could be hoping for a three-way collaboration, birthing a global giant in airline catering and ground handling services,” the note dated Wednesday said.

“In the near term, we expect all three groups to run independently as part of Temasek’s portfolio,” CGS-CIMB said, adding any market “excitement” was likely premature.

The note added that with SATS focusing on a deal with Turkish Airlines to expand a new kitchen in Istanbul in phases and its joint venture with AirAsia Malaysia, which began operating in November, the company’s “plate could be full.”

It kept a Hold call with a S$5.17 target price.

“At 22 times 2019 price-to-earnings, we think the stock is fairly priced as we expect single-digit earnings growth ahead,” it said. “Downside to our earnings forecasts could come from longer-than-expected time to seal a deal with Turkish Airlines and hiccups in new markets.”

Support for the stock was likely at S$5.32 and resistance was likely at S$5.524, according to DZHI data. Buy orders were clustered around S$5.45 and sell orders around S$5.47, the data show.