Who will be right?
“Now that SIA has divested SATS, the company’s true value is more likely to be appreciated by the market. We estimate a surplus of $0.20/share that can be paid as dividends to shareholders if properties held at cost are sold and leased back,” writes Kim Eng Securities.
In mid-June 2009, I analysed SATs as follows:
Why new SAT shareholders should be grumpy
On May 14, SIA announced that it was going to distribute to its shareholders its 81% stake in SATS by way of a dividend in specie. Since then share price is up 5%.
This comes after SATS has become cash poor.
In January 2009, SATS launched a takeover bid for its Temask stable-mate SFI. According to the takeover documents, the pro-forma balance sheet as at September 2008 would have shown that the net cash position of the SATS (including SFI) group deteriorated to minus S$21 from S$528. In particular, cash in fixed deposits would have fallen from S$573 million to S$64 million.
But SATS needs cash because “SATS is committed to growing its 2 core businesses of airport and food services”. It could borrow big-time, pro forma net gearing is 0.04% from (0.35)%. But in Singapore, where debt is a dirty word in GLCs (NOL comes to mind), a rights issue is reasonably probable.
Temasek as the new controlling shareholder of SATS has $356 million from its sale of SFI shares to fund any rights issue. But do other new SATS shareholders have the cash?
Finally, looks like MM Lee gets his way. In 2004, he said SIA should divest itself of SATS and SIAEC. SIA’s management demurred. Will SAEC be divested despite SIA mgt saying last night that the SAEC holding is strategic? Stay tuned.
Or will be both wrong, and CIMB prove correct? It doesn’t have any expectations of corporate activities, being underwhelmed by SATS.