SATS upgraded to Accumulate by Phillip despite earnings miss

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Phillip Capital upgraded SATS to Accumulate from Neutral despite fiscal full-year underlying profit missing its forecasts.

“We like the stock for its regional expansion story and pipeline of growth initiatives,” it said in a report on Thursday. “The group continues to grow its footprint across Asia and is leveraging on technology to improve productivity as volumes increase.”

Phillip said it expected the investments in new ventures and partnerships would spur inorganic growth at the associate and joint venture level, which it forecast would contribute an increasing proportion of earnings.

SATS reported its fiscal fourth quarter profit attributable to the owners of the company fell 1.8 percent on-year to S$65.4 million, while revenue was down 0.5 percent at S$423.5 million. For the full fiscal year, profit attributable to the owners was up 1.4 percent at S$261.5 million, while revenue slipped 0.3 percent to S$1.72 billion, the company said in a filing to SGX on Wednesday.

Phillip noted that while revenue and profit after tax and minority interests (PATMI) were line with expectations, underlying profit came in 7.5 percent below its forecast on a year-earlier one-off surplus related to the acquisition of a 10 percent stake in Evergreen Sky Catering.

But it pointed to a “positive surprise” of a higher final dividend of 12 Singapore cents, up from 11 Singapore cents a year earlier. And raised its target price to S$5.58 from S$5.33.

The stock ended Thursday down 2.27 percent at S$5.16.