Phillip cuts target for SATS to $3.30

Phillip Securities has lowered its target price for Singapore Airport Terminal Services to US$2.59 from US$2.73 on concerns over food inflation, but maintained its "buy" rating.

Phillip said that food price inflation could put pressure on SATS' profit margins in the near term, as food costs comprise the main raw material costs of the company.

Raw material costs as a percentage of revenue for SATS' food provider "Food Solutions" also rose 1.5 percent from the year before, according to Phillip's report.

"However, we are optimistic that SATS would be able pass on a significant portion of their higher costs to the end customers through menu reviews and CPI pegged contracts," the broker said.

 SATS shares were down 1.4 percent at US$2.169 on a volume of over 2.1 million shares.
 

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