3QFY14 net profit missed estimates, being 8.7% y/y lower at $42.9m, while topline was shaved by 1.1% to $465.5m. Revenue from Gateway Services increased 4.3% to $173.3m, offset by Food Solutions which contributions dropped 3.9% to $291.1m in light of the weakening Yen. Japanese subsidiary TFK revenue fell 18%, but excluding yen business, yen revenue grew and TFK was profitable. In particular, in flight catering revenue fell 4.6% on loss of income from Qantas. Expenses were lower overall, while share of associate?s profits was 7.4% higher at $0.9m, supported by good performances in China/ Indonesia. Management guided that operating landscape remains challenging in view of ongoing pressure on airlines? profitability and rising labour costs, and expects modest growth at Changi Airport coupled by marginal growth in airfreight at best. That said, CS is optimistic towards SATS? medium to long term outlook driven by new growing businesses and Changi airport expansion. Deutsche says under its blue sky scenario (no M& A and gradual increase of leverage over 5 years, also factoring in transformation capex), it expects SATS dividend yield to potentially double from current 4-5%. SATS closed yesterday at 21x annualized 3Q13 P/E. NAV at end Dec was $1.224. No dividend declared in the quarter. Latest broker ratings: CS: Downgrades to Neutral from O/PF, with TP cut to $3.35 (from $3.70) Deutsche: Maintains Buy, but with TP cut to $3.43 (from $3.51) UOBKH: Maintains Hold with lower TP of $3.08 (from $3.24)
Still believe in the potential in SATS to grow for the next few years. No dividends declared is a disappointment though.