Stock market Analysis: SATS Ltd

• Unlikely to see margins recover yet
• May benefit from Qantas’ return
• Maintain HOLD

Higher Traffic Does Not Mean Higher Margins

For the period between Jan and Jul 17, Singapore’s Changi Airport recorded strong traffic statistics as passenger throughput rose 5.5% YoY, and aircraft movements grew 3.1% on the back of encouraging tourism data in Singapore. According to Singapore Tourism Board, visitor arrivals (by air transport) between Jan and Jun 17 registered a healthy 5.2% YoY growth, driven mainly by visitors from Australia, China, India and Indonesia.

SATS Ltd (SATS) is a provider of gateway services (GS) and food solutions (FS) at Changi Airport and we estimate it handles close to 80% of the traffic throughput there. Hence, we believe the traffic growth recorded is positive for SATS.

That said, passenger yields remain weak for the airline industry, which translates to pressure on SATS’ margins as its airline customers will likely engage in cost management efforts, especially for its low cost carrier customers.

Qantas Return to Changi Airport May Potentially Benefit SATS

Australia-listed Qantas Airways Ltd (Qantas) announced recently the extension of its partnership with Emirates for another five years (subject to government and regulatory approval), while making certain changes to the collaboration. Notably, there are two key changes from 25 Mar 18 onwards:

Qantas will re-route its daily Sydney-London A380 service via Singapore rather than Dubai, to replace one of the existing two daily Sydney-Singapore A330 services, and

Qantas will upgrade one existing daily Melbourne-Singapore flight from an A330 to an A380, with the second three per week service increased to a daily A330 service.

In essence, these changes will be positive for traffic growth at Changi Airport, and if SATS does secure FS and GS contracts from Qantas, it may further provide a lift to its earnings.

Re-engage Closer to S$4.70 or Lower

All considered, we prefer to wait for its 2QFY18 results for clarity over its margins and keep our forecasts unchanged. Maintain HOLD on SATS with a S$5.05 FV, but would look to re-engage below S$4.70.

Source -  OCBC Research 

Market Outlook steady-MAS

Analysts raise Singapore Q3 GDP view, but 2017 outlook steady-MAS

Financial Advisor have raised their estimates for Singapore's monetary development in the second from last quarter, with assembling movement prone to stay strong after a solid first a large portion of, a national bank review appeared on Wednesday. 

The quarterly review by the Monetary Authority of Singapore (MAS), nonetheless, demonstrated no adjustment in the market analysts' middle estimates for entire year development in 2017 and furthermore for 2018, contrasted with three months back. 

Singapore's total national output is relied upon to grow 2.5% in both this year and furthermore one year from now, as per the middle conjecture of 21 financial experts reviewed by the MAS. 

The market analysts' perspectives on 2017 GDP development are in accordance with what the administration now anticipates. 

In August, the Ministry of Trade and Industry said that the entire year 2017 GDP development should come in at around 2.5%, and updated its authority 2017 development gauge to a scope of 2.0 to 3.0% from 1.0 to 3.0% already. 

The MAS overview's middle gauge for year-on-year GDP development in the second from last quarter rose to 3.1%, up from the past middle of 2.8%. 

The assembling segment was required to grow 8.3% in the July-September quarter from a year sooner, the MAS review appeared. 

In the second quarter, Singapore's GDP expanded 2.9% from a year sooner, with assembling growing 8.1%. Second-quarter GDP grew 2.2% from the past three months on an annualized and occasionally balanced premise. 

Share market analysts additionally rolled out no huge improvements to their expansion conjectures. 

Financial experts expect the national bank's center swelling gauge to rise 1.6% for the entire of 2017, the MAS overview appeared, up from 1.5% beforehand. They trimmed their estimate for center swelling in 2018 to 1.6% from 1.7%. 

As per the most recent MAS review, market analysts' middle conjecture for all-things CPI swelling in 2017 was brought down to 0.8% from 0.9%. Their estimate for feature swelling in 2018 was unaltered at 1.4%. 

Financial specialists assessed that the Singapore dollar will exchange at 1.380 U.S. dollar by end-2017. It was exchanging almost 1.3530 on Wednesday. 

Singapore's propel gauge of second from last quarter GDP and the national bank's twice-yearly fiscal approach choice, are both due to be declared in October. 

The predominant desire among investigators has been that the MAS will keep its conversion scale based strategy settings unaltered in October, since there has been a minimal indication of any wide get sought after drove inflationary weights in spite of the enhanced development prospects this year.

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Review: Singapore Stocks Market Opened at 0.4% up

SINGAPORE stocks opened 0.4 for each penny higher on Wednesday, with the Straits Times Index climbing 14.1 focuses to 3,263.44 as at 9.01am. This came as Wall Street put aside butterflies over North Korea's rocket dispatch and rose to a positive complete overnight, turning around misfortunes from prior in the day. 

On the Singapore bourse, around 84.6 million offers worth S$113.1 million altogether changed hands, which worked out to a normal unit cost of S$1.34 per share. 

The most effectively exchanged counter was Blumont, which was level at S$0.001 with 23.4 million offers evolving hands. Different actives included Global Logistic Properties and Swee Hong. 

Gainers dwarfed washouts 79 to 50. 

Somewhere else, Japan's Topix rose 0.6 for every penny, and Australia's S&P/ASX 200 Index increased 0.3 for every penny, while the Kospi edged up, Bloomberg announced.

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Geo Energy Resources Limited: Indonesian coal mining bunch Geo Energy Resources Limited has set up another unit to put resources into a controlling value stake in an online web based business gateway in Indonesia, denoting the gathering's initial invasion into non-coal related business since its foundation in 2008. Geo Energy shut at S$0.265 on Monday. 

Keppel Corporation Limited: Keppel Corporation's unit, Keppel Land Limited, has on Aug 28, 2017 evaluated S$150 million in the total vital measure of 2.843 for each penny notes due 2023, the gathering said in a Singapore Exchange documenting on Tuesday. The notes are required to be issued on Sept 5, 2017 at an issue cost of 100 for each penny of the important sum and in divisions of S$250,000. Keppel Corp shut at S$6.39 on Monday. 

New Silk routes Group Limited: New Silk routes Group's net misfortune enlarged to US$1 million for its final quarter, from a net loss of US$268,000 in the year-prior period, the gathering said in a Singapore Exchange documenting on Tuesday. Be that as it may, for the three months finished June 30, income surged 227.2 for every penny to US$114.6 million from the earlier year, fundamentally because of the gathering's completely claimed oil exchanging auxiliary, International Energy Group Pte Ltd, handing over another solid quarter, it said. No profit was proposed. New Silk routes Group shares finished unaltered at S$0.39 on Monday.

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Share Market Update: Micro-Mechanics posts record revenue and earnings in FY17

Micro-Mechanics, the maker of high exactness devices and parts for the semiconductor business, announced profit hopped 24.2% to a record $14.8 million for FY17 finished June from a year back. .

Small scale Mechanics says the gathering's solid bottom line returned on the of income development of 11.7% to $57.2 million, an extension in net overall revenue to 57.4% and a tight rein on the cost structure. 

This mirrored the solid upturn of the worldwide semiconductor industry amid the initial a half year of 2017 as measurements accumulated by the Semiconductor Industry Association demonstrated overall chip deals grew 20.8% to US$190.5 billion ($258.3 billion). 

For the 4Q17 finished June, Micro-Mechanics' income jumped 60.9% to achieve a quarterly record of $4.6 million. Gathering income took off 19.5% to $15.4 million. 

Small scale Mechanics is proposing to pay the last profit of 4 pennies for every offer and an extraordinary profit of 1 penny for each offer on Nov 17. This will convey add up to profits for FY17 to 8 pennies for every offer contrasted with 6 pennies for FY16. 

Counting these last and extraordinary profits, the gathering would have circulated a sum of 53.9 pennies for each offer to investors since its open posting in 2003. 

Chris Borch, CEO of Micro-Mechanics, says, "trust the vigorous first-half begin to the year may portend a drawn out time of more grounded industry development as chips turn out to be progressively utilized as a part of about each part of present day life. With manufacturing plants in China, Malaysia, the Philippines, Singapore, the USA and our business office in Taiwan, Micro-Mechanics is very much situated to give quick, successful and neighborhood support to our clients on the planet's real semiconductor markets." 

As at June 30, Micro-Mechanics kept up a sound monetary record with add up to resources of $65.6 million, investors' value of $54.8 million, money and money reciprocals of $23.4 million and no bank borrowings. 

As at 1.02pm, shares in Micro-Mechanics are exchanging 3 pennies higher at $1.40.

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