SATS - UOB Kay Hian 2023-01-25: On Track To Complete The WFS Acquisition

• With the receipt of shareholders’ approvals, SATS is on track to complete the WFS deal in Mar/Apr 23. We estimate the financial impact of the WFS deal to be dilutive for SATS in the initial years after the transaction is completed, although this also depends on how quickly the global air cargo outlook turns around and how fast SATS can realise its forecasted synergy.
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SATS’ proposed acquisition of WFS approved by shareholders.

• See SATS' announcement dated 18 Jan 2023 – SATS (SGX:S58)’s proposed acquisition of Worldwide Flight Services (WFS) was approved by shareholders during the EGM last week. 57.6% of the total issued shares attended and voted at the EGM and among those voted, 96.8% voted in favour of the acquisition.
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• Pending rights financing. To recap, as part of the funding plan for the acquisition, SATS intends to raise S$800m via a rights issue. Management had previously guided that the issuance price would not be at a steep discount to its share trading price prior to the issuance. In arriving at our post-acquisition financial projection, we have tentatively factored in a rights issuance price of S$2.60, leading to an issuance of 308m new shares.
• Updated financial projection incorporates impact of the WFS deal. We have updated our financial model for SATS by incorporating the impact from the acquisition of WFS, assuming the deal is completed in early Apr 23. We highlight that our current projection is based on:
  1. SATS’ provisional purchase price allocation (PPA) related to the WFS deal, and
  2. SATS’ (best-efforts) estimation of the reporting differences when converting WFS’ current financial reporting to the SFRS(I) accounting standards, as disclosed in SATS’ acquisition circular.
• Should SATS’ estimation for these accounting items change after the transaction, our forecasts for SATS’ reported financials would be adjusted accordingly.

The WFS deal is likely EPS-dilutive in the initial years…

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Roy Chen CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-01-25 SGinvestors.io

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