SATS is trading at an attractive price, with a positive longer term outlook amid its expansion in Asia, OCBC said, upgrading the stock to Buy from Hold.
The positive longer-term view hinges upon SATS diversification strategy of expanding outside Singapore and into non-aviation segments via collaboration with overseas partners, OCBC said in a note last week.
“For non-aviation, we like its partnership with Wilmar to supply quality and safe food in China, leveraging on each other’s capabilities (i.e. SATS’ expertise in operating central kitchen and Wilmar’s extensive distribution network in China),” OCBC said.
Within aviation, it said it was constructive on SATS’ ground-handling partnership with AirAsia, with each owning an interest in the other’s ground-handling units.
“We are long-term positive on this partnership as it allows SATS to gain access to 15 airports in Malaysia,” it said.
OCBC also pointed to a potential catalyst from a potential deal with Turkish Airlines for in-flight catering at Istanbul New Airport.
Within Singapore, OCBC noted that Changi Airport posted encouraging operating statistics for April, with passenger throughput up 5.1 percent on-year. The bank estimated SATS handles around 80 percent of the traffic throughput at Changi Airport.
OCBC kept its fair value on the share at S$5.50.
The stock ended Thursday down 0.79 percent at S$5.02.