SATS Ltd (SATS) announced yesterday that it has entered into a share sale and purchase agreement with MacroAsia Corporation (MAC) to acquire an additional 13% equity stake in the capital of Macro Asia Catering Services, Inc (MACS). The terms of the purchase include an initial consideration of ~S$5.1m and a potential earn-out consideration subject to the achievement of certain set targets. The transaction is expected to be completed by end Aug 15.

Post-acquisition, SATS’ shareholding in MACS will increase to 33%, with the remaining 67% held by MAC. We think the acquisition allows SATS to grow its presence in the Philippines but unlikely to have any material impact in the near term. Hence, we opt to keep our forecasts unchanged for now.

With weakness in the outlook of the aviation industry, we think SATS’ growth will be steady but not significant in the near-to-medium term. Currently, we have a HOLD rating with FV estimate of S$3.22 on SATS. Note that SATS will be announcing its results later this evening, after market closes.

Source: OCBC Research - 23 Jul 2015