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SATS Ltd – Breakeven in sight and funding clarity to drive re-rating
Recommendation: ACCUMULATE (INITIATION), Last Done: S$2.69
Target price: S$3.02, Analyst: Terence Chua
- Funding clarity to reduce overhang on the Company. SATS has provided clarity on its funding structure for the Worldwide Flight Services (WFS) acquisition by committing to a cap of S$800mn on the rights issue. We modeled a 3 for 10 rights issue scenario at an issue price of S$2.29 (~15% discount to last close) to arrive at a TERP of S$2.60.
- SATS profitability is at a key inflection point with breakeven in 2HFY23. We expect the Group to turn profitable by FY24e with the resumption of dividend in the same year.
Initiate with ACCUMULATE and a target price of S$3.02. Our valuation is pegged to 18.5x FY24e, which is -1sd below its historical average. Risks to our view include 1) integration challenges for WFS and 2) revenue growth continuing to lag behind expenses growth.
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ComfortDelGro:
Sustaining Y-o-y Growth; Maintain BUY
■ ComfortDelGro (SGX:C52)'s 3Q22 business update confirmed our assessment that it will continue to report y-o-y earnings growth. However, inflationary pressures from higher fuel and wage costs and a mismatch in the timing of cost increases vs being compensated for cost inflation translated into margin compression that quarter.
■ ComfortDelGro should book y-o-y earnings growth in 2023, thanks to an improving taxi segment and higher rail ridership. Valuation is compelling after the recent corrrection of ComfortDelGro's Share Price.
Valuation Is Compelling.
- ComfortDelGro's Share Price has dropped by 17% in last three months and the stock's forward P/E is now well below its 10-year average, making the valuation quite compelling. Our target price includes a 12% ESG premium over the DCF-derived S$1.60 fair value.
- Maintain BUY recommendation on ComfortDelGro with S$1.80 target price, 46% upside with a -4% FY22F yield.
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Nanofilm Technologies International
Expect a challenging 4Q22 due to disrupted production; downgrade to SELL.
(NANO SP / SELL / S$1.27 / Target: S$1.02)
We expect Nanofilm to report a weak 4Q22, with 2H22 earnings to decline by 30% yoy, due to Foxconn’s production in Zhengzhou, China being disrupted. The city is still subject to tight restrictions even though the seven-day lockdown was lifted on 9 Nov 22.
The ongoing restrictions have led to Customer Z reducing its shipment forecasts for premium phones. We cut 2022 and 2023 EPS by 19% and 17% respectively. Downgrade to SELL with a 43% lower target price of S$1.02…
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Thai Beverage
Cheers to reopening
• Reinstate coverage on one of the most valuable
large-cap ASEAN F&B counters, with BUY, TP: S$0.84
(36% upside)
• Expect upcoming FY22F to post 9% y-o-y growth;
momentum expected to continue into FY23F, despite
macro uncertainties
• No issues on refinancing without BeerCo IPO or
rising interest rate; net gearing to taper to 0.5x by
FY24F
• Valuation attractive at 14.0x FY23F PE, at c.-1.0SD of
its 5-year average
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