SATS second-quarter PATMI down a disappointing 3.2% to S$48.7m

Rest of FY14 is looking grim.

SATS revenue dipped 2% yoy to S$452.1m following declines in the food solutions segment, while EBITDA fell 11.6% YoY to S$65.7m as a result of higher staff costs, noted OCBC Investment Research.

"Fortunately, a better performance from its Indian and Indonesian associates managed to offset a weaker contribution from TFK and helped to arrest its PATMI decline to only 3.2% YoY to S$48.7m," added OCBC.

SATS management also declared an interim dividend of 5 S cents, similar to last year’s amount.

The research firm sees a weaker second half for SATS, with revenue expected to reel even more.

"Qantas’ relocation to Dubai was the main factor for SATS’s revenue decline in 1HFY14. As SATS experiences the full impact on a YoY basis, we are likely to see revenue fall further for 2HFY14," explained OCBC.

"In addition, EBITDA margins (1QFY14: -0.3ppt oya to 13.9%; 2QFY14: -1.6ppt oya to 14.5%) have also fallen due to higher staff costs (wage increments from 1QFY14) and an increase in services to LCCs vis-à-vis premium carriers. This trend is likely to extend into 2HFY14," it added.