Why a reduced stake in China JV is a positive for SATS

It is reducing its stakes in Jilin JVCo to 21%.

SATS is lowering its stakes in Jilin Zhong Xin Cheng Food (Jilin JVCo) from 35% to 21% as another investor joins the group and Charoen Pokphand Group (CP) and comes in to pump assets into the Chinese joint venture.

According to OCBC Investment Research, whilst SATS’s effective stake is reduced, having two strong strategic partners on board is certainly positive over the longer-term.

"Singbridge is experienced in investing into China, and has an ongoing project with the Jilin City Government to develop a sustainable model food zone in Jilin tailored for quality and safe food production in China and the region. CP, on the other hand, has a vertically integrated feed to farm to food operation business with extensive distribution network providing safe food to consumers," it said.

The brokerage firm tagged SATS's expertise in operating efficient central kitchens as another positive.

"We believe the three partners will be able to tap on each other’s expertise to grow the Jilin JVCo sustainably, providing safe food, which is likely to be in high demand given growing focus and awareness on safe food supply," OCBC Investment Research said.