CIMB Research upgraded its rating on airline services company SATS Ltd to ‘outperform’ from ‘neutral’ and raised its target price to S$3.32 from S$2.82, citing a rise in air travel in Singapore.
SATS shares were up 0.7 percent at S$2.96 and have gained 2.4 percent since the start of the year, compared with the FTSE ST Industrials Index’s 3 percent rise.
CIMB expects higher air traffic volume through Singapore. In November, Singapore’s Changi Airport handled an average 920 flights per day, a record high. With the thriving air travel in Singapore, CIMB said SATS can offer stable earnings growth and yields of over 4 percent.
Meanwhile, CIMB said SATS’ profit margins were expected to recover, helped by easing food inflation. The brokerage expects SATS’s core net profit margin to improve 0.4 percentage points to 9.9 percent in 2013.