A strong finish to the year!

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.

• Stronger than expected end to the year

• B/S still below optimal capital structure, paving the way for higher dividend distributions in the future

• Final & Special DPS of 21.0cents

• Maintain Buy with revised TP of S$2.80

What is the news?

SATS announced a 10.7% decline in net income for the year, mainly due to the lack of contributions from Daniels Group that was divested in the year. After adjusting for the effects of one off items, underlying profits from continuing operations declined by 4.3%. EBITDA margin declined by 2.3ppt as a result of slight margin compression at its core business in Singapore and lower profitability at TFK Corp. SATS announced special dividend of 15.0cents and final dividend of 6.0cents, taking full year payout to 26.0cents per share.

How do we view this?

SATS’s result for FY12 was stronger than our expectations, mainly due to lower than expected staff cost incurred in 4QFY12. Even after accounting for the special dividend payout, SATS is still expected to have a healthy balance sheet with a net cash position. The company’s capital structure would also be significantly below management’s long term net gearing target of 30%. Hence, we believe that SATS have the capacity to pay and would likely increase its long term dividend payouts, in the absence of suitable M&A opportunities.

Investment Actions?

We maintain our Buy recommendation on SATS and revised our target price to S$2.80 as we roll forward our valuation basis and account for the special dividend payout. At the current price, SATS offers a yield of >10% over the next 12 months.

A resilient stock for uncertain times

Company Overview

ComfortDelGro Corporation (CDG) is a land transport conglomerate with businesses across various business segments and geography. The bus and taxi businesses are the largest profit contributors for the Group.

• Net income increased 6.8%y-y

• Rail profitability declined in preparation for DTL

• Australia’s bus business the best performer

• Maintain Buy with unchanged TP of S$1.65

What is the news?

CDG reported a strong 6.8% growth in net profit for the quarter due to strong underlying business growth with relatively unchanged margins. Profit contributions increased across all business segments, except for the Rail & Driving centre business. Despite revenue growth of 13% for the Rail business, profitability declined as the company ramped up its headcount in preparation for DTL.

How do we view this?

The results were in line with our expectations. Most business units performed well with healthy margins and revenue growth. However, contributions from CDG’s China bus business disappointed and reported a second consecutive quarter of loss due to lower mileage operated. Among the more significant profit contributors, Australia’s bus business performed the best with an estimated 18.5% increase in profits in local currency terms.

Investment Actions?

CDG remains our preferred stock in the Land Transport sector. The Group’s overseas diversification shields them from the near term headwinds facing Singapore’s Land Transport sector. Maintain Buy.

ComfortDelgro’s Q1 profit at S$53.5 million

Transport operator ComfortDelgro on Monday reported a 6.8 per cent rise in first-quarter net profit from the year-earlier period to S$53.5 million as revenue grew 6.5 per cent to S$855.4 million.

The taxi business led growth, accounting for about 43 per cent of the increase in group turnover, followed by the bus business with 34 per cent, the automotive engineering services business with 17 per cent, the rail and vehicle inspection and testing businesses with about 4 per cent each, and the bus station business with about 2 per cent.

These more than offset declines in revenue by the driving centre and car rental and leasing businesses, it said.

Revenue from the ComfortDelgro’s overseas operations accounted for 40.7 per cent of total turnover, it added.

ComfortDelGro is one of the world’s largest land transport companies with a total fleet size of over 46,400 buses, taxis and rental vehicles. Based in Singapore, it also has operations in China, the United Kingdom, Ireland, Australia, Vietnam and Malaysia.

ComfortDelgro’s Q1 profit at S$53.5 million

Transport operator ComfortDelgro on Monday reported a 6.8 per cent rise in first-quarter net profit from the year-earlier period to S$53.5 million as revenue grew 6.5 per cent to S$855.4 million.

The taxi business led growth, accounting for about 43 per cent of the increase in group turnover, followed by the bus business with 34 per cent, the automotive engineering services business with 17 per cent, the rail and vehicle inspection and testing businesses with about 4 per cent each, and the bus station business with about 2 per cent.

These more than offset declines in revenue by the driving centre and car rental and leasing businesses, it said.

Revenue from the ComfortDelgro’s overseas operations accounted for 40.7 per cent of total turnover, it added.

ComfortDelGro is one of the world’s largest land transport companies with a total fleet size of over 46,400 buses, taxis and rental vehicles. Based in Singapore, it also has operations in China, the United Kingdom, Ireland, Australia, Vietnam and Malaysia.