Citi Research analyst Kaseedit Choonnawat has kept his “buy” call on SATS as the group is deemed as being “well-positioned” to capture Changi Airport’s mid-term traffic recovery.
He has, however, lowered his core earnings estimates for the FY2023 and FY2024 by 75% and 13% respectively to factor in near-term costs and revenue mismatch pressures.
On the other hand, the analyst has increased his earnings estimates for the FY2025 by 19% based on incremental anecdotal evidence of strong air-traffic volume recovery.
“Our revised earnings are 54% below [the] street for FY2023, 4% below for FY2024 and in-line for FY2025,” he observes.
In his report dated July 9, SATS is still seen as Choonnawat’s aviation sector pick in Asean.
Further to his report, the analyst has increased his target price to $4.70 from $4.60 previously, which reflects his valuation rollover to FY2023.
“Beyond near-term capacity re-ramping costs / revenue mismatch and declines in non-aviation food revenue related to Covid facilities in Singapore, of which the market is aware; we see strong air-traffic recovery at Changi Airport (46% of pre-Covid in May, forward schedule points to 80% by November) and structural connecting traffic share gains from other Asean hubs as key share price drivers,” the analyst writes.
SATS will be releasing its results for the 1QFY2022 ended June after market trading hours on July 22.
As at 10am, shares in Sats are trading 1 cent higher or 0.25% up at $4.04.
