SATS (SATS SP, $2.89, BUY, TP $3.48) – SATS’ 2QFY Mar11 results were within expectations. Net profit rose 10.5% to $45.2m but adjusted profits actually grew 31% YoY despite higher raw material and staff costs, as well as the weaker pound. With growth led by non‐aviation food services, we believe the time has come for SATS to be re‐rated as a premium valuation food company rather than as a cyclical aviation play.

SATs Presentation

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A035EDC5824663C3482577CF003187D5/$file/SATS_Presentation_2Q_1011.pdf?openelement

Media Release

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A035EDC5824663C3482577CF003187D5/$file/MediaRelease_2Q1011_Final.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A035EDC5824663C3482577CF003187D5/$file/SGX_2QFY1011_Final.pdf?openelement

In the second quarter of FY2010-11, higher across-the-board activities lifted the Group revenue by 11% (+$38.9 million) to $401.2 million. Aviation revenue grew 9% (+$19.0 million) to $234.7 million on the back of increased flights handled as well as higher cargo and meal volumes. Non-aviation revenue rose 14% (+$20.3 million) to $164.1 million as a result of higher catering revenue attributed to the one-off provision of meals for the Youth Olympics Games and higher contribution from UK operations, particularly the fruit and chilled ready meals categories. Excluding the $6.3 million jobs credit benefit received in the second quarter of FY2009-10, core operating profit improved 13% (+S$4.9 million) year-on-year despite higher raw material costs and staff costs on higher activity levels...

Dividend:  5 Cents