SATS – MayBank Kim Eng

Raises exposure to Indonesia

  • Acquires 42% stake in Indonesia’s leading aviation service provider CAS.
  • Positive move as it raises exposure to fast-growing Indonesia.
  • Purchase adds 3% to our FY3/15E-16E EPS. Maintain BUY.


Acquires 42% stake in PT CAS

SATS announced yesterday the acquisition of a 41.65% stake in PT Cardig Aero Services TBK (CAS) for IDR1,108b (approximately SGD118.3m). CAS is a food solutions and gateway services provider in Indonesia that is listed on the Indonesia Stock Exchange. It derives 73% of its sales from SATS’ 49.8%-owned associate PT Jasa Angkasa Semesta(JAS), which offers ground & cargo services across 11 airports in Indonesia. According to SATS, CAS is the leading player in the Indonesian aviation market with major international airlines, including Singapore Airlines, as its customers. Through its relationship with JAS, SATS has over 10 years of working relations with the CAS management. This acquisition will not trigger a General Offer for the rest of CAS’s listed shares and SATS will continue to equity account for both CAS and JAS post acquisition.

Positive on larger exposure to fast-growing Indonesia

Many airlines have been increasing their capacity between Singapore and Indonesia ever since the two countries inked a bilateral air service agreement last year. With its international clientele, we expect CAS to benefit from the traffic growth between the two countries. While the acquisition price implies a significant 50% premium to CAS’s market price, we argue that an estimated valuation multiple of 21.5x CY14E P/E is reasonable, given the positive growth outlook for the business. Furthermore, SATS can comfortably fund this acquisition with its war chest of SGD355m (Dec 2013). We estimate that this acquisition will add 3% to our FY3/15E-16E earnings forecasts and raise our estimates accordingly. Reiterate BUY with unchanged DCF-based TP of SGD3.47 (WACC = 7.6%, tg= 1.0%).

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