SATS’ earnings growth to slow to a trickle in FY17-18: report

It will drop to 3-4%, from 20% in FY16.

SATS may be in a sweet spot to catch the windfall of improving air traffic trends at Changi Airport, the firm’s earnings growth is expected to wane to 3-4% in FY17-18.

According to a report by Maybank Kim Eng, this is a steep drop from FY16’s 20% growth. Maybank Kim Eng also notes it is doubtful that the strong margin expansion in FY16 from the deconsolidation of its low-margin food distribution business to its joint venture with BRF can be repeated.

In addition, current cost relief from lower airport charges will expire on 31 March 2017.

The report further points out that while the recent ratification of the ASEAN Open Skies is positive, infrastructure constraints will limit traffic upside in the medium term.

Meanwhile, estimates show SATS’ core net profit shooting up 24.5% in Q4.

“We believe TFK Corp will report a positive set of results on incremental contribution from its contract with Delta, which started in Oct 2015, and a stronger JPY against the SGD,” the report states.

“We also expect better performance from its Singapore operations on higher workload (Unit Services: +14.5% YoY) from the return of Jetstar. It should also book an exceptional gain of SGD9m from the sale of a property,” adds the report.

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