3 reasons why SATS is geared up for a bullish 2013

Aviation-linked units boosted 1H13 revenue by 11.1%.

According to OCBC, since the release of its 2QFY13 results, SATS Ltd (SATS) has rallied by more than 4% to reach peak levels this year.

Here's more from OCBC:

On a YTD basis, SATS is up almost 35% and is poised to close out the year at highs last seen in Jan 2011.

As a recap, SATS’s aviation-related segments led revenue growth for the group in 1H13 with an 11.1% YoY improvement. This trend is likely to continue unabated in 2H13 with the following support factors:

i) SATS’s dominant market share in Changi Airport will allow it to benefit from the sustained monthly YoY increases in passenger and commercial flight movements

ii) TFK’s stabilization following the recovery from last year’s natural disasters to remain top-line supportive

iii) ongoing efforts to win new and extend existing contracts (recent big renewals include Singapore Airlines).

Although the Asia-Pacific region has experienced weaknesses stemming from slower economic growth in China and a persistent decline in overall cargo traffic for large parts of the year, SATS has been relatively unaffected.

The growth in regional traffic and network enhancement by airlines – particularly in the low-cost carrier segment – has largely benefited SATS.

Despite incurring higher operating expenses due to headcount additions and workforce-related statutory fees, we do not foresee an erosion of operating margin in 2H13 with the group maintaining its emphasis on productivity enhancement and cost saving initiatives e.g. the procurement of raw materials directly from suppliers, reduction in wastage and better menu deployment.

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