SATS (S$2.62) - Growth from overseas, but not so soon While SATS’s business volume for inflight catering, ground handling and cargo is expected to grow modestly, the pressure on rates from local competition may dampen overall earnings growth.
We do not expect new JVs to be earnings-accretive in FY08-09 due to the initial ramp-up phase. We have reduced our earnings estimates by 3% for FY08-10 on slower earnings accretion expected from overseas JVs and switched our valuation methodology to P/E from blended DDM and P/E in view of the limited dividend visibility.
Our new target price of S$3.02 is based on 16x CY09 P/E, or a 20% discount to the peer average for airports in the Asia-Pacific, given that SATS does not hold a monopoly at Changi Airport. Downgrade to Neutral from Outperform.
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