SATS – Phillip

Visit to MBCCS

Company Overview

SATS Ltd is a provider of Airport Services & Food Solutions with a dominant presence in Singapore's Changi Airport. The Group also has a network of JVs across Asia and holds a majority stake in TFK Corp, an inflight catering business based in Japan.

  • New cruise centre contribution immaterial in near term
  • Highly variable cost structure
  • Dividend yields of 5-6% remains attractive
  • Maintain Neutral with TP of S$2.65


What is the news?

We visited the Marina Bay Cruise Centre Singapore (MBCCS) that is operated by SATS's new JV, SATS-Creuers. Salient points from the visit:

  • Infrastructure. 80 check-in counters, max capacity of 6,800 passengers at any time, 25 coach bays, 327 carpark lots, walkway linkage to MRT station expected to be ready in 2014, minimal retail space.
  • Customers. Royal Carribean International, Celebrity Cruises, Holland America Lines, Princess Cruises, Silversea Cruises and Azamara Cruises. Hosted 8 vessels since opening in May 2012. Another 60 plus vessels scheduled till the end of FY13E.
  • CruiseFly. 5 airlines (Singapore Airlines, SilkAir, Air China, China Eastern & China Southern) currently offer CruiseFly services.
  • Staff. 12-15 permanent staff with extra workload handled by subcontractors.
  • Financials. Not expected to reach revenue of S$10mn in the near term, highly variable operating cost structure.

How do we view this?

Our view remains unchanged and do not think that this new venture would have a material impact to SATS and its stock in the next 1-2 years. The ability to handle larger vessels is the only significant advantage that MBCCS has over the existing cruise terminal facility at Harbourfront Centre.

Investment Actions?

While we maintain our Neutral view on the stock, our Singapore Sector Strategist remains overweight on the Aviation Services sector for their sustainable yields. On our projections, SATS would yield 5-6% over the next 3 years.

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