SATS’s 4QFY14 results came in below our expectations. Revenue declined 3.2% YoY to S$434.6m, which is 7.9% below our forecast. Correspondingly, PATMI dropped 7.8% YoY to S$42.6m, which is 5.8% below our estimate. Share of after-tax profits from overseas associates/joint venture for 4QFY14 was S$9.9m, 46.5% lower YoY. This was mainly due to the poorer performance of some of the Gateway associates/joint venture arising from lower cargo volumes and higher staff costs. On a full-year basis, FY14 revenue dropped by 1.8% to S$1,786.7m.

The 5.2% revenue decline in Food Solutions to S$1,103.6m (mainly due to the translation loss resulting from the weakening of JPY), was partially mitigated by a 4.5% revenue increase in Gateway Services to S$678.1m. FY14 PATMI came in 2.4% lower YoY at S$180.4m, where the underlying net profit from continuing operations was 9.4% lower at S$183.0m. We maintain HOLD but keep our fair value estimate of S$3.35 under review pending a change in analyst.

Source: OCBC Research - 22 May 2014