To recap, SATS’s share price has risen by 6.2% to its Jan 10 closing price of $4.94 since OCBC upgraded the stock to “buy” last year on Nov 29.
This translates to a forward P/E of 20 times, which is close to SATS’s historical average over the last five years and implies a forecasted dividend yield of 3.9%.
In a Friday report, analyst Low Pei Han notes that operating statistics have been mixed for Changi Airport over Nov 2018, reflecting weaker growth figures compared to that of Jan-Nov 2017 versus 2016.
“Traffic growth at Changi Airport has a direct impact on SATS as we estimate SATS to handle about 80% of the traffic throughput there. In the longer term, the addition of Terminal 5 to Changi Airport (construction to begin 2020) will benefit SATS since it is the dominant ground handling provider at Changi Airport,” says Low.
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“Competition in the airline industry may also continue to result in pricing pressures on SATS, though the lower oil price is a near-term reprieve for the industry,” she adds.
As at 10.35am, shares in SATS are trading flat at $4.94 or 21.7 times FY19F earnings.
