SATS – BT
SATS Q3 profit falls 25.4% on 32.3% higher revenue
Loss of $5.5m on sale of UK food business, JVs’ falling contribution cited
SATS Ltd reported a 25.4 per cent drop in net profit to $38.2 million for the third quarter, from $51.2 million a year earlier, due to rising costs, loss from the disposal of its UK-based food business, falling contribution from joint ventures & associates, and a weaker US dollar.
Revenue grew 32.3 per cent to $442.3 million, from $334.3 million. Earnings per share fell to 3.5 cents from 4.6 cents a year earlier.
During the quarter, SATS recognised a loss of $5.5 million on the disposal of UK-based Daniels.
Food solutions revenue rose 49.4 per cent to $285.3 million, due mainly to the consolidation of Tokyo Flight Kitchen (TFK) which contributed $82 million to its revenue. Excluding TFK, food solutions revenue improved 6.5 per cent, led by more airline meals served during the quarter. Excluding TFK’s expenditure of $80.5 million, group expenditure rose at a lower rate of 9.2 per cent to $318 million, attributed to higher staff, raw material and utilities costs.
In October 2011, SATS announced the disposal of Daniels Group (Daniels) in the UK. The loss on disposal of Daniels was $5.5 million. After adjusting for Daniels’ results and one-off M&A expenses for TFK acquisition incurred in Q3 FY11, SATS’ underlying net profit from continuing operations was $43.7 million.
A combination of weaker cargo volumes by associates (led by Hong Kong) saw SATS’ share of profits of associates and JVs fall 15.7 per cent to $12.9 million.
For the nine months ended December 2011, SATS posted net profit of $120.8 million, down 14.1 per cent from $140.7 million a year earlier. Revenue rose 31 per cent to $1.25 billion. Higher expenditure saw group operating profit drop 3.5 per cent or $4.4 million to $120.7 million. Underlying net profit from continuing operations, after adjusting for TFK and Daniels, dropped at a lower rate of 5.6 per cent to $129.9 million.
As at end-December 2011, SATS’ total assets stood at $2.13 billion, down 7.8 per cent from nine months earlier, while cash balance rose from $296.1 million to $421.3 million.
Equity attributable to shareholders was $1.47 billion, down 3.6 per cent from March 31 2011, due mainly to dividend payments of $188.4 million which were partially offset by profits recorded in the first nine months of the current year. Debt to equity ratio remained steady at 0.12 times.
During the third quarter, SATS saw the number of flights handled and unit services grow 13.3 per cent and 10.5 per cent respectively year-on-year, underpinned by the seasonally high travel season from October to December 2011. Gross meals increased by 4.1 per cent and unit meals by 3 per cent, in line with the higher passenger traffic recorded during the quarter, while cargo throughput went up slightly by 1.6 per cent.
The company is cautious about the final quarter citing the seasonally low travel period between January and March.
It does not expect its Singapore International Cruise Terminal (ICT) venture, where it has a 60 per cent stake in a partnership – with Creuers Cruise Services holding the remaining share – to be profitable in its first year after operations start. The company, which invested $3.6 million in the venture, pointed out that most cruise operators plan their itineraries more than a year in advance. But it remains confident that, given its ability to take larger ships, the ICT will prove to be a profitable venture in the medium to longer term.
SATS shares closed trading yesterday at $2.39, up four cents.
SATS – BT
SATS Q3 profit falls 25.4% on 32.3% higher revenue
Loss of $5.5m on sale of UK food business, JVs’ falling contribution cited
SATS Ltd reported a 25.4 per cent drop in net profit to $38.2 million for the third quarter, from $51.2 million a year earlier, due to rising costs, loss from the disposal of its UK-based food business, falling contribution from joint ventures & associates, and a weaker US dollar.
Revenue grew 32.3 per cent to $442.3 million, from $334.3 million. Earnings per share fell to 3.5 cents from 4.6 cents a year earlier.
During the quarter, SATS recognised a loss of $5.5 million on the disposal of UK-based Daniels.
Food solutions revenue rose 49.4 per cent to $285.3 million, due mainly to the consolidation of Tokyo Flight Kitchen (TFK) which contributed $82 million to its revenue. Excluding TFK, food solutions revenue improved 6.5 per cent, led by more airline meals served during the quarter. Excluding TFK’s expenditure of $80.5 million, group expenditure rose at a lower rate of 9.2 per cent to $318 million, attributed to higher staff, raw material and utilities costs.
In October 2011, SATS announced the disposal of Daniels Group (Daniels) in the UK. The loss on disposal of Daniels was $5.5 million. After adjusting for Daniels’ results and one-off M&A expenses for TFK acquisition incurred in Q3 FY11, SATS’ underlying net profit from continuing operations was $43.7 million.
A combination of weaker cargo volumes by associates (led by Hong Kong) saw SATS’ share of profits of associates and JVs fall 15.7 per cent to $12.9 million.
For the nine months ended December 2011, SATS posted net profit of $120.8 million, down 14.1 per cent from $140.7 million a year earlier. Revenue rose 31 per cent to $1.25 billion. Higher expenditure saw group operating profit drop 3.5 per cent or $4.4 million to $120.7 million. Underlying net profit from continuing operations, after adjusting for TFK and Daniels, dropped at a lower rate of 5.6 per cent to $129.9 million.
As at end-December 2011, SATS’ total assets stood at $2.13 billion, down 7.8 per cent from nine months earlier, while cash balance rose from $296.1 million to $421.3 million.
Equity attributable to shareholders was $1.47 billion, down 3.6 per cent from March 31 2011, due mainly to dividend payments of $188.4 million which were partially offset by profits recorded in the first nine months of the current year. Debt to equity ratio remained steady at 0.12 times.
During the third quarter, SATS saw the number of flights handled and unit services grow 13.3 per cent and 10.5 per cent respectively year-on-year, underpinned by the seasonally high travel season from October to December 2011. Gross meals increased by 4.1 per cent and unit meals by 3 per cent, in line with the higher passenger traffic recorded during the quarter, while cargo throughput went up slightly by 1.6 per cent.
The company is cautious about the final quarter citing the seasonally low travel period between January and March.
It does not expect its Singapore International Cruise Terminal (ICT) venture, where it has a 60 per cent stake in a partnership – with Creuers Cruise Services holding the remaining share – to be profitable in its first year after operations start. The company, which invested $3.6 million in the venture, pointed out that most cruise operators plan their itineraries more than a year in advance. But it remains confident that, given its ability to take larger ships, the ICT will prove to be a profitable venture in the medium to longer term.
SATS shares closed trading yesterday at $2.39, up four cents.
StarHub – DMG
A small glitter
StarHub’s FY11 results were in line, with revenue up 3% while EBITDA rose by a stronger 12.3% y-o-y on good cost management and improved postpaid revenue. The steady core EBITDA margin for 4QFY11 was a pleasant surprise despite a jump in handset cost and given the acute margin pressure at M1 earlier. We tweak our forecast downwards by <1% for FY12/13 following the results and retain our DCF FV of SGD2.80 (WACC: 8.5%, TG: 1.5%). Starhub remains a NEUTRAL as its longer term prospects are clouded by the content carriage ruling, which dilutes its pay-TV franchise, and the competitive headwinds from NGN services.
Broadly in line. Starhub’s FY11 earnings of SGD315.5m appeared to be ahead of consensus and our forecast as 4QFY11 EBITDA surged 11% q-o-q due to the reversal of over-provisioning of staff cost in the earlier quarters. Stripping this out, its earnings were broadly in line. The 4QFY11 revenue growth of 10% q-o-q (+7% q-o-q) reflected the jump in handset sales (+80.3% q-o-q) as the iPhone 4S made its debut last October. Positively, its service revenue grew at the fastest in over 6 quarters, thanks to stronger growth in mobile (+3% y-o-y), pay-TV (+8% y-o-y) and fixed network (+4% y-o-y) revenue, which together contribute 81% of service revenue. We gather that StarHub benefitted from the typically stronger roaming revenue at the year-end, in contrast with M1, which earlier said its roaming revenue was weak and adversely affected by travelers purchasing local starter packs. The other key operational takeaways were: (i) the relatively stable cable broadband segment despite competition from SingTel and the NGN fiber service, and (ii) Starhub’s indication that handset subsidy remains sticky, implying subscriber acquisition cost should remain relatively high in the interim. StarHub did not disclose the number of fiber customers it had but we estimate this to be not too far from M1’s reported 22k.
Better able to monetize data. Starhub said that some 97% of the handsets sold were smartphones, with the take-up among its postpaid and prepaid base at 70% and 30% respectively (implying a smartphone penetration of 50% on its network). We note that StarHub successfully widened its postpaid ARPU over the past few quarters versus a decline at M1, which may reflect that it is better able to monetize data traffic, of which 30-40% is derived from smartphone users. Management acknowledges the shift towards tiered data pricing to further monetize data usage and will continue to monitor the competitive response in the market. On LTE, Starhub expects to roll out its service in 2H2012, with the availability of more devices then to support the launch.
Guidance. Starhub has guided for revenue growth of low single digit for 2012 and its 5 cents/quarter dividend payout, which translates into an attractive 7% yield. It expects capex to not exceed 11% of revenue, including SGD25m carried over from FY11.
StarHub – DMG
A small glitter
StarHub’s FY11 results were in line, with revenue up 3% while EBITDA rose by a stronger 12.3% y-o-y on good cost management and improved postpaid revenue. The steady core EBITDA margin for 4QFY11 was a pleasant surprise despite a jump in handset cost and given the acute margin pressure at M1 earlier. We tweak our forecast downwards by <1% for FY12/13 following the results and retain our DCF FV of SGD2.80 (WACC: 8.5%, TG: 1.5%). Starhub remains a NEUTRAL as its longer term prospects are clouded by the content carriage ruling, which dilutes its pay-TV franchise, and the competitive headwinds from NGN services.
Broadly in line. Starhub’s FY11 earnings of SGD315.5m appeared to be ahead of consensus and our forecast as 4QFY11 EBITDA surged 11% q-o-q due to the reversal of over-provisioning of staff cost in the earlier quarters. Stripping this out, its earnings were broadly in line. The 4QFY11 revenue growth of 10% q-o-q (+7% q-o-q) reflected the jump in handset sales (+80.3% q-o-q) as the iPhone 4S made its debut last October. Positively, its service revenue grew at the fastest in over 6 quarters, thanks to stronger growth in mobile (+3% y-o-y), pay-TV (+8% y-o-y) and fixed network (+4% y-o-y) revenue, which together contribute 81% of service revenue. We gather that StarHub benefitted from the typically stronger roaming revenue at the year-end, in contrast with M1, which earlier said its roaming revenue was weak and adversely affected by travelers purchasing local starter packs. The other key operational takeaways were: (i) the relatively stable cable broadband segment despite competition from SingTel and the NGN fiber service, and (ii) Starhub’s indication that handset subsidy remains sticky, implying subscriber acquisition cost should remain relatively high in the interim. StarHub did not disclose the number of fiber customers it had but we estimate this to be not too far from M1’s reported 22k.
Better able to monetize data. Starhub said that some 97% of the handsets sold were smartphones, with the take-up among its postpaid and prepaid base at 70% and 30% respectively (implying a smartphone penetration of 50% on its network). We note that StarHub successfully widened its postpaid ARPU over the past few quarters versus a decline at M1, which may reflect that it is better able to monetize data traffic, of which 30-40% is derived from smartphone users. Management acknowledges the shift towards tiered data pricing to further monetize data usage and will continue to monitor the competitive response in the market. On LTE, Starhub expects to roll out its service in 2H2012, with the availability of more devices then to support the launch.
Guidance. Starhub has guided for revenue growth of low single digit for 2012 and its 5 cents/quarter dividend payout, which translates into an attractive 7% yield. It expects capex to not exceed 11% of revenue, including SGD25m carried over from FY11.
HLFin – Lim and Tan
DBS‘ 17-cent drop yesterday to $13.36, and HONG LEONG FINANCE‘s 10-cent gain in 2 days to $2.40 is interesting.
•
Media on both sides of the Causeway reported that a quid pro quo arrangement is being looked into by the 2 governments.
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The general view is that DBS will at last be able to “enter” Malaysia, either on its own or via an acquisition (reason for the price drop?).
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Malaysian banks will also be able to upgrade their limited licence in Singapore. (Malayan Bank is the only Malaysian bank with a qualifying full bank licence – allowed 25 service locations.)
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Another possible candidate for some consideration, we like to believe, is HLF under Kwek Leng Beng‘s chairmanship. A merger with Hong Leong Bank Sdn Bhd, controlled by his cousin brother Tan Sri Quek Leng Chan would make eminent sense.
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HLF has severely lagged the banks (see attachment below), which we would attribute to its unsteady dividend policy. It will get a significant boost.
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We are upgrading HLF to a BUY, largely because of its underperformance. A maintained dividend at 2010’s 12 cents would give a yield of 5%.
|
DBS |
OCBC |
UOB |
HLF |
|
|
Current ($) |
13.53 |
8.56 |
17.4 |
2.35 |
|
2010 High ($) |
15.5 |
10.3 |
20.8 |
3.2 |
|
2011 Low ($) |
10.9 |
7.7 |
14.8 |
2.07 |
|
% Decline (%) |
29.7 |
25.2 |
28.8 |
35.3 |
|
Current Rebound (%) |
24.1 |
11.2 |
17.6 |
13.5 |