Author: kktan
SATS – Phillip
Healthy growth on seasonal strength
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.
- 7.6% growth in underlying net profit.
- Guidance positive for passenger travel business, while air freight business is expected to remain weak.
- We expect dividend yields to sustain above 5% over the next few years.
- Maintain Accumulate with TP of S$3.33.
What is the news?
Driven by strong performance of its aviation business units in Singapore, SATS reported a 23% surge in profit for 3QFY13. When normalized to exclude one-off items in the previous quarter, underlying profits improved by 7.6%. EBITDA margins were stable at 15.0% (vs 3QFY12: 15.5%). Contribution from TFK was mildly impacted by a decline in traffic flows due to a seasonally stronger 2QFY13 and depreciation of the JPY. Outlook statement is positive for the passenger travel business, while the air freight business is expected to remain weak.
How do we view this?
As guided in our commentaries for the results season, the surge in profits was expected due to a seasonally stronger quarter for the aviation business in Singapore. CAPEX for 9MFY13 of S$28.4mn is significantly lower than its normalized level of S$50-70mn a year, which could lead to cash build up by the end of FY13E.
Investment Actions?
We maintain our view that SATS have the capacity to dish out significantly higher levels of dividends to shareholders over the next few years. Assuming a 90% payout ratio, we forecast dividend yields of >5% over the next few years. Maintain Accumulate with revised TP of S$3.33, as we roll forward our valuation basis.
January 2013
Results announcement
- 14 Jan 13 : SPH (Q113) – EPS = 6ct
- 21 Jan 13 (AM) : MIIF (2H12) – DPU = 2.75ct (Final) + 3ct (Special)
- 21 Jan 13 : M1 (Q412) – EPS = 4.1ct (todate 16.1ct) ; Div = 6.3ct Final + 1.7ct Special (todate 14.6ct)
- 25 Jan 13 : SingPost (Q313) – EPS = 1.889ct (todate 5.25ct) ; Div = 1.25ct (todate 3.75ct)
- 29 Jan 13 : SMRT (Q313) – EPS = 1.7ct (todate 6.3ct)
- 30 Jan 13 : SATS (Q313) – EPS = 4.2ct (todate 12.5ct)
- 5 Feb 13 : SIAEC (Q313)
- 7 Feb 13 : SBSTransit (Q412)
- 8 Feb 13 : ComfortDelgro (Q412)
- 14 Feb 13 (AM) : SingTel (Q313)
- 15 Feb 13 : STEng (Q412)
STI = 3280.39 (-5.51)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY11 (Dec) |
22.65 |
12.00 |
$2.700 |
4.444% |
11.92 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY12 (Mar) |
7.407 |
6.25 |
$1.210 |
5.165% |
16.34 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.100 |
5.854% |
17.83 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY12 (Mar) |
15.40 |
26.0 |
$3.050 |
8.525% |
19.81 |
Interim 5ct ; Final 6ct + Special 15ct |
|
SIA Engg |
FY12 (Mar) |
24.56 |
21.0 |
$4.950 |
4.242% |
20.15 |
Interim 6ct ; Final 15ct |
|
ST Engg |
FY11 (Dec) |
17.28 |
15.5 |
$3.920 |
3.954% |
22.69 |
Interim 3ct ; Final 4ct + Special 8.5ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY11 (Dec) |
11.89 |
5.90 |
$1.510 |
3.907% |
12.70 |
Interim 3.1ct ; Final 2.8ct |
|
ComfortDelGro |
FY11 (Dec) |
11.27 |
6.00 |
$1.930 |
3.109% |
17.13 |
Interim 2.7ct ; Final 3.3ct |
|
SMRT |
FY12 (Mar) |
7.9 |
7.45 |
$1.630 |
4.571% |
20.63 |
Interim 1.75ct ; Final 5.7ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY12 (Mar) |
25.04 |
15.8 |
$3.500 |
4.514% |
13.98 |
Interim 6.8ct ; Final 9ct |
|
M1 |
FY12 (Dec) |
16.1 |
14.6 |
$2.780 |
5.252% |
17.27 |
Interim 6.6ct ; Final 6.3ct + Special 1.7ct |
|
StarHub |
FY11 (Dec) |
18.40 |
20 |
$3.900 |
5.128% |
21.20 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
1H – Sep12 |
A4.1 (Gross) |
$1.495 |
7.070% |
$1.300 |
1H13 A4.1ct ; 2H12 A4.0ct |
|
MIIF |
2H – Dec12 |
5.75 |
$0.650 |
8.462% |
$0.700 |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2889) fm Yahoo
NOTES :
- Mkt Price is as on 31-Jan-13
- M1 : 2H12 (Dec) – Final 6.3ct + Special 1.7ct ; 1H12 (Jun) – Interim 6.6ct
- MIIF : 1H12 (Jun) – 2.75ct ; 2H12 (Dec) – 2.75ct (Final) + 3ct (Special) ; Above Yield is Computed without Special Dividend
- SingTel : 1H13 (Sep12) – Interim 6.8ct
- SPAus : 1H13 (Sep12) – A4.1ct = A1.367ct (Franked) + A2.467ct (Interest) + A0.266ct (Capital Returns)
- SATSvcs : Q213 (Sep12) – Interim 5ct
- StarHub : Q312 (sep) – 5ct ; Q212 (Jun) – 5ct ; Q112 (Mar) – 5ct
- SMRT : Q213 (Sep12) – Interim 1.5ct
- SIAEC : Q213 (Sep12) – Interim 7ct
- SingPost : Q213 (Sep12) – 1.25ct ; Q113 (Jun12) – 1.25ct
- SPH : 2H12 (Aug) – Final =9ct + Special = 8ct ; 1H12 (Feb) – Interim = 7ct
- ST Engg : 1H12 (Jun) – 3ct
- ComfortDelgro : Q212 (Jun) – 2.9ct
- SBSTransit : Q212 (Jun) – 1.35ct
- SPAus : 2H12 (Mar12) – A4ct = A1.333ct (Franked) + A2.159ct (Interest) + A0.508ct (Capital Returns) ; FY12 Guidance = A8.2ct ; 3-for-20 @ S$1.25 (A$1)
- StarHub : FY12 Div Guidance – 5ct/Q
January 2013
Results announcement
- 14 Jan 13 : SPH (Q113) – EPS = 6ct
- 21 Jan 13 (AM) : MIIF (2H12) – DPU = 2.75ct (Final) + 3ct (Special)
- 21 Jan 13 : M1 (Q412) – EPS = 4.1ct (todate 16.1ct) ; Div = 6.3ct Final + 1.7ct Special (todate 14.6ct)
- 25 Jan 13 : SingPost (Q313) – EPS = 1.889ct (todate 5.25ct) ; Div = 1.25ct (todate 3.75ct)
- 29 Jan 13 : SMRT (Q313) – EPS = 1.7ct (todate 6.3ct)
- 30 Jan 13 : SATS (Q313) – EPS = 4.2ct (todate 12.5ct)
- 5 Feb 13 : SIAEC (Q313)
- 7 Feb 13 : SBSTransit (Q412)
- 8 Feb 13 : ComfortDelgro (Q412)
- 14 Feb 13 (AM) : SingTel (Q313)
- 15 Feb 13 : STEng (Q412)
STI = 3280.39 (-5.51)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY11 (Dec) |
22.65 |
12.00 |
$2.700 |
4.444% |
11.92 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY12 (Mar) |
7.407 |
6.25 |
$1.210 |
5.165% |
16.34 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.100 |
5.854% |
17.83 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY12 (Mar) |
15.40 |
26.0 |
$3.050 |
8.525% |
19.81 |
Interim 5ct ; Final 6ct + Special 15ct |
|
SIA Engg |
FY12 (Mar) |
24.56 |
21.0 |
$4.950 |
4.242% |
20.15 |
Interim 6ct ; Final 15ct |
|
ST Engg |
FY11 (Dec) |
17.28 |
15.5 |
$3.920 |
3.954% |
22.69 |
Interim 3ct ; Final 4ct + Special 8.5ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY11 (Dec) |
11.89 |
5.90 |
$1.510 |
3.907% |
12.70 |
Interim 3.1ct ; Final 2.8ct |
|
ComfortDelGro |
FY11 (Dec) |
11.27 |
6.00 |
$1.930 |
3.109% |
17.13 |
Interim 2.7ct ; Final 3.3ct |
|
SMRT |
FY12 (Mar) |
7.9 |
7.45 |
$1.630 |
4.571% |
20.63 |
Interim 1.75ct ; Final 5.7ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY12 (Mar) |
25.04 |
15.8 |
$3.500 |
4.514% |
13.98 |
Interim 6.8ct ; Final 9ct |
|
M1 |
FY12 (Dec) |
16.1 |
14.6 |
$2.780 |
5.252% |
17.27 |
Interim 6.6ct ; Final 6.3ct + Special 1.7ct |
|
StarHub |
FY11 (Dec) |
18.40 |
20 |
$3.900 |
5.128% |
21.20 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
1H – Sep12 |
A4.1 (Gross) |
$1.495 |
7.070% |
$1.300 |
1H13 A4.1ct ; 2H12 A4.0ct |
|
MIIF |
2H – Dec12 |
5.75 |
$0.650 |
8.462% |
$0.700 |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2889) fm Yahoo
NOTES :
- Mkt Price is as on 31-Jan-13
- M1 : 2H12 (Dec) – Final 6.3ct + Special 1.7ct ; 1H12 (Jun) – Interim 6.6ct
- MIIF : 1H12 (Jun) – 2.75ct ; 2H12 (Dec) – 2.75ct (Final) + 3ct (Special) ; Above Yield is Computed without Special Dividend
- SingTel : 1H13 (Sep12) – Interim 6.8ct
- SPAus : 1H13 (Sep12) – A4.1ct = A1.367ct (Franked) + A2.467ct (Interest) + A0.266ct (Capital Returns)
- SATSvcs : Q213 (Sep12) – Interim 5ct
- StarHub : Q312 (sep) – 5ct ; Q212 (Jun) – 5ct ; Q112 (Mar) – 5ct
- SMRT : Q213 (Sep12) – Interim 1.5ct
- SIAEC : Q213 (Sep12) – Interim 7ct
- SingPost : Q213 (Sep12) – 1.25ct ; Q113 (Jun12) – 1.25ct
- SPH : 2H12 (Aug) – Final =9ct + Special = 8ct ; 1H12 (Feb) – Interim = 7ct
- ST Engg : 1H12 (Jun) – 3ct
- ComfortDelgro : Q212 (Jun) – 2.9ct
- SBSTransit : Q212 (Jun) – 1.35ct
- SPAus : 2H12 (Mar12) – A4ct = A1.333ct (Franked) + A2.159ct (Interest) + A0.508ct (Capital Returns) ; FY12 Guidance = A8.2ct ; 3-for-20 @ S$1.25 (A$1)
- StarHub : FY12 Div Guidance – 5ct/Q
SMRT – Kim Eng
3Q Encumbered by Expense Escalation
3Q results below expectations; SELL call reinforced. SMRT Corp (SMRT) reported 9MFY3/13 PATMI that comprised less than 70% of ours and consensus’ full-year FY3/13 estimates, as 3QFY3/13 PATMI fell 31.2% YoY to SGD25.5m. We had forecast cost increases to continue plaguing SMRT, led by staff, repair and maintenance costs, but not to the magnitude reported this quarter. SMRT remains a SELL, as its core transport business continues to be a drag on company profitability. Our Target Price is trimmed to SGD1.34, implying 20% downside.
No let-up on escalating operating costs. SMRT’s operating costs featured heavily in the disappointing profitability shown by the company this quarter. Repair and Maintenance costs led the way with a 29.1% YoY increase to SGD26.9m, caused by a larger transport fleet and increase in scheduled maintenance. Staff costs followed closely with an 18.2% YoY increase to SGD98.5m attributed to increased train and bus hiring as well as wage adjustments.
Only Taxis, Rentals showed profit improvement. The only bright spots in SMRT’s business segments this quarter were its taxi and commercial space rental businesses. The Taxi business was boosted by a 16% increase in revenues from a newer and larger hired-out fleet, improving operating profit by SGD1.9m (+174.7% YoY). The commercial space rental business improved SGD1.3m (+8.3% YoY) as a result of new and redeveloped spaces at various stations.
No light at end of tunnel yet, reiterate SELL. As SMRT’s core transport woes still see no sign of letting up, we reiterate our SELL call pegged to 15x FY3/14 PER. Our target price is trimmed to SGD1.34 as we adjust our FY3/14 forecasts downwards by 3% to account for further operating expense increases. We advise investors looking for transport-related yield plays to consider switching to other sectors like aviation services where industry fundamentals present a rosier environment than that currently facing the Singapore land transport operators.
SingTel – CIMB
Exits Pakistan
SingTel is selling its 30% stake in Warid Telecom (WT), which was acquired in mid-07, for US$150m (S$185m) or an 86% loss on its total investment of S$1.31bn. It will book in a loss of S$238m in FY13. We raise our SOP-based target price for SingTel by 1 Sct to S$3.23.
This is to reflect the sale proceeds as we had used WT’s carrying value of S$38m in our SOP. No change to our forecasts as we have stopped equity-accounting WT since SingTel reclassified it as “asset held for sale”. SingTel is an Underperform given policy risks and stiff competition and we prefer StarHub or Axiata.
What Happened SingTel announced that it is selling its 30% stake in WT to its JV partner Warid Telecom Pakistan (WTP) for US$150m and the right to receive a 7.5% share of the net proceeds from any future sale by WTP. WTP owns the remaining 70% of WT. SingTel had ceased to equity-account for WT after reclassifying it as an “asset held for sale” on 1 Jul 12.
What We Think
The sale proceeds, excluding the value of any future sale by WTP, represent a loss of 86% on SingTel’s total investment of S$1.31bn in WT. Besides fierce competition and high sales tax, Pakistan’s political and economic climate has deteriorated since SingTel acquired WT. The Pakistani rupee (PKR) also halved in value relative to the S$ over the course of SingTel’s investment from S$39.8/PKR in mid-07 to S$79.1/PKR currently.
With SingTel exiting Pakistan, all eyes will be on its 45%-owned CDMA-based PBTL in Bangladesh, which it has also reclassified as “asset held for sale”. To date, SingTel has invested S$238m in PBTL. The loss in Pakistan should not overshadow SingTel’s excellent track record of investing in regional mobile players that has made it become Southeast Asia’s largest telco.
What You Should Do
As SingTel faces policy risks in India, stiff competition in Australia and margin pressure in Singapore, switch to StarHub (Outperform), our top Singapore telco pick, or Axiata (Outperform) for exposure to emerging market telcos. We expect StarHub to raise its quarterly dividend from 5 Scts to 6 Scts while Axiata could pay more than the 65% guided. Both telcos have solid FCFE generation and low gearing