SATS

[winston]

not vested

Valuations in-line with industry, public equity need time to digest

SATS announced acquisition of Worldwide Flight Services (WFS) at an EV of S$3.11bn and equity of S$1.74bn, indicating EV/EBITDA and P/E 9.7x/45.1x.

EV/EBITDA valuation in line with industry median of c.11x over the past decade. Post de-leveraging, P/E could be more palatable at 16.9x.

Worst case of S$1.7bn in EFR suggests TERP of S$3.49 at c.10% downside.

On a longer-term basis, if executed well, this could be a pivotal point for SATS to transform into a global leader. Maintain Add and TP of S$4.47.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... AB66F720FA

[winston]

not vested

Analysts mixed on SATS's proposed WFS acquisition; UOB Kay Hian downgrades call to 'hold'

by Felicia Tan

Plans to acquire WFS, which is the world’s largest air cargo handling firm, for EUR1.19 billion ($1.64 billion) in cash.

WFS currently owns $1.67 billion of debt, which is serviced at an interest rate of 7%-8% per annum (p.a.).

Source: The Edge

https://www.theedgesingapore.com/capita ... rades-call

[winston]

vested

SATS Ltd (SATS SP) - Near-term pain

SATS announced a proposed acquisition of Worldwide Flight Services (WFS), the largest global air cargo handler, with a global network across 18 countries, including leading positions at key strategic hubs in Europe and North America.

The total cost of the proposed acquisition is estimated to be ~EUR1,340m (SGD1,851m), to be financed with the proceeds from equity fund raising (EFR), debt, issuance of hybrid securities and/or internal cash resources.

The final decision regarding the proposed funding plan has not been announced.

SATS also obtained an acquisition bridge facility for a Singapore dollar equivalent amount of up to EUR1,200m (SGD1,657m) to fund and complete the proposed acquisition, if required.

Post-acquisition, SATS will become the largest global air cargo handler; enjoy benefits from revenue and cost synergies given its enlarged scale; greater earnings resilience through geographic and business diversification; and potential synergies in excess of SGD100m EBITDA over the medium-term.

The transaction implies an EV/EBITDA multiple of 9.7x.

We think the valuations are fair, compared to SATS’ 10-year historical EV/EBITDA average of 15.7x and in-line with historical global ground handling transactions average of 9.8x.

The proposed acquisition is likely to benefit SATS over the long-run given WFS’ status as a global leader in cargo with a complementary portfolio to SATS.

Investors with a long-term investment horizon may stay invested but a potential EFR could be an overhang, weighing on near-term share price performance.

SATS will convene an Extraordinary General Meeting by early 2023. Temasek which owns ~40% of SATS has agreed to vote in favour of the proposed acquisition.

Pending more clarity on the funding structure, we keep our fair value estimate at SGD4.72. BUY.

Source: OCBC

[winston]

vested

Exploring funding options

In this report, we explore bear-bull scenarios of funding options for SATS’s S$1.82bn acquisition of WFS with potential TPs of S$3.05 to S$3.84.

Our base-case funding structure: S$300m cash, 20% debt, 20% equity-linked instruments and c.40% of EFR with no strategic investors.

Our TP of S$3.45 is based on 18x CY24F SATS’s BAU net profit as well as WFS refinanced profit. 18x is -0.5 s.d. of its 2013-2018 pre-Covid average.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 8A284DAA29

[winston]

vested

SATS (SATS SP)
More Palatable Risk-reward Profile After Share Price Decline

In the investor meeting during UOB Kay Hian’s Asian Gem Conference, management
shared insights and clarified investors’ queries about the WFS deal.

Following the sharp share price drop after the acquisition announcement, SATS’ risk-reward profile is more attractive in our view and suits investors with a longer-term horizon.

We upgrade SATS to BUY, with a lower target price of S$3.08 based on an SOTP valuation, factoring in very conservative valuation metrics for WFS.

Source: UOBKH

https://research.uobkayhian.com/content ... d25b9e1fe6

[winston]

not vested

Sats reports 1HFY2023 loss of $32.5 million, proposed rights issue to be capped at $800 million

Sats has reported revenue of $804.5 million for 1HFY2023 ended Sept 30, up 41.33% y-o-y, led by the resumption of travel demand and higher volume of cargo handled.

The rights issue is targeted to be launched after an EGM this coming January.

Source: The Edge Singapore

https://www.theedgesingapore.com/capita ... 00-million

[winston]

not vested

Inflight caterer and ground handler SATS on Wednesday (Nov 9) reported a net loss of S$9.9 million for its second quarter, reversing a year-ago profit of S$6.8 million, as operating expenses rose and lower government grants were received.

Excluding the effect of reliefs, net loss for the three months ended Sep 30 would have been S$19.7 million, an improvement from the S$30.1 million net loss excluding reliefs in the year-ago period, the company said in a bourse filing.

During the second quarter, SATS revenue rose 46 per cent to S$429 million, as its food and gateway segments reported higher revenue on the back of aviation recovery and the consolidation of revenue from Asia Airfreight Terminal.

Operating expenses climbed 48.9 per cent to S$437 million, due to factors such as higher staff costs and lower job support grants, the group said.

For the first half of its financial year, SATS revenue climbed 41.3 per cent on year to S$804.5 million, driven by growth in cargo volume and recovery in travel demand.

The group’s net loss for H1 FY23 stood at S$32.5 million, a reversal from the net profit of S$13.2 million in the year-ago period. Excluding the impact of government reliefs, net loss for H1 FY23 would have been S$51.7 million, an improvement from S$65.5 million loss in the prior-year period.

No dividend was declared.

The company said the proposed rights issue will not exceed S$800 million. With the total acquisition cost of S$1.8 billion, the balance will be funded primarily through a combination of term loans and internal cash, SATS said. The rights issue is targeted to be launched after an extraordinary general meeting, expected to be convened in January 2023, with further details of the funding plan to be announced prior to the meeting.

Source: Phillips

[winston]

not vested

Better operating leverage; likely no SI

2QFY3/23 net loss of S$10m (1QFY23: S$22.5m loss) beat our forecast of S$18m loss; operating losses narrowed to S$8m (1QFY23: S$34m).

Likely funding for WFS acquisition: c.S$800m from rights issue, S$700m term loans, c.S$300m cash. Strategic investor (SI) only if favourable long term.

Maintain Add and S$3.45 TP, pending definitive funding mix for WFS acquisition, to be out in Nov-Dec with EGM by Jan and completion by Mar 23

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 72D78EF07D

[winston]

not vested

SATS (SATS SP)
2QFY23: Core Losses Narrowing; Likely To Return To Profitablity Next Quarter

Excluding government reliefs, one-offs and professional fees related to the WFS deal,
SATS’ core net loss stood at S$5m-10m in 2QFY23, a meaningful improvement over
1QFY23’s ex-relief core net losses of S$31.9m.

We expect SATS to return to positive core profitability in the next quarter as we head into the year-end peak travel season.

Management has updated its financing plan for the WFS deal to use only straight equity
and more debt. Maintain BUY with an unchanged target price of S$3.08.

Source: UOBKH

https://research.uobkayhian.com/content ... 5c980cbf5c

[behappyalways]

Sats reports 1HFY2023 loss of $32.5 million, proposed rights issue to be capped at $800 million
https://www.theedgesingapore.com/capita ... 00-million