Broker's take: CGS-CIMB says worst could be over for SATS, upgrades to 'hold'

CGS-CIMB has upgraded its call on SATS to "hold" from "reduce", with an increased target price of S$3.00 from S$2.80. The research team said the worst could be over for the ground handler and food solutions provider's bottom line.

Shares of SATS were trading up S$0.09 or 2.9 per cent to S$3.17 as at 10.17am on Tuesday.

The stock can be seen as a recovery play for long-term investors, CGS-CIMB analyst Lim Siew Khee said in a research note dated Monday.

SATS' recorded S$43.7 million loss for the first quarter ended June 30, 2020 was in line with the company's guidance of "narrower than S$50 million to S$70 million", but missed CGS-CIMB's more hopeful net loss estimate of S$30 million. Revenue and associate performance were key misses.

"We believe this could be the worst quarter due to improving cargo volume, heading into peak season (September - December 2020) as well as better freight rates on the back of stronger demand for perishable and medical supplies," Ms Lim said.

SATS is the worst performing stock at about negative 40 per cent year to date among the large cap FSSTI stocks. This may have priced in structural challenges in the aviation sector, Ms Lim said.