SATS will effectively hold 60% in SATS Ground Services -- T4’s ground handling business -- and 49% in Ground Team Red Sdn Bhd -- AirAsia’s ground handling operations.
The deal sees SATS paying $119.3 million for 38.6% of Ground Team Red and taking 11.4% in Ground Team Red by giving up 80% of SATS Ground Services.
While AirAsia’s ground handling serves only AirAsia in Malaysian airports and its earnings are undisclosed, Yeo believes the operations are profitable.
“We believe the deal is positive for SATS strategy-wise as it now has a stake in a Malaysian ground handling business to add to its network,” says analyst Alfie Yeo in a Tuesday report.
SATS had previously acquired 34.3% of Brahim’s Airlines Catering Holdings Sdn Bhd (BACH) in 2015. Existing business at Changi is not affected since the new entity is dedicated to only T4.
Yeo is maintaining a “buy” with a target price of $5.02. SATS’ 2Q18 results will be announced on Nov 9.
As at 1.47pm, shares in SATS are down 2 cents at $4.67 or 20.2 times FY17 earnings.
