ANALYSTS on Monday (Jul 25) cut their target prices on SATS : S58 0% after the inflight caterer’s first-quarter results missed expectations.

Teams from CGS-CIMB and DBS Group Research warned of potential near-term weakness on the counter as cost pressure continue to weigh on the mainboard-listed group.

CGS-CIMB lowered its target on the counter to S$4.47 from S$4.88, but maintained its “add” call, while DBS trimmed its target to S$4.30 from S$4.50 and maintained “hold”.

The new target prices represent a potential upside of 13.7 per cent (CGS-CIMB) and 9.4 per cent (DBS) from SATS’ price of S$3.93 as at the Monday midday trading break. SATS was trading 1.5 per cent or S$0.06 lower at the time.

On Friday, the mainboard-listed company posted a net loss of S$22.5 million for the quarter ended June due to lower government grants and increased costs. Excluding government reliefs, losses for Q1 2023 would have stood at S$31.9 million, versus a net loss of S$35.6 million in Q1 2022.

The results missed CGS-CIMB’s net profit estimates as rises in operating costs outpaced revenue recovery. That being said, SATS’ revenue was in line at 20.4 per cent of the research team’s FY2023 estimates.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

For DBS, SATS’ Q1 2023 results were “slightly below” expectation amid mounting cost pressures. The research team noted that operating margins improved sequentially in the quarter, but will require more time to turn positive.

Both research teams have cut their earnings estimates after factoring in cost headwinds. CGS-CIMB slashed its FY2023 earnings per share estimates by 64.4 per cent, while DBS lowered its FY2023 net profit estimates by 34.1 per cent.

However, DBS raised its FY2023 revenue projection by 3.8 per cent to “reflect a more pronounced recovery” in travel-related revenue. This comes as significant pent-up travel demand continues to be released over the short term.