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SATS purchase of Singapore Cruise Centre

Well I thought this was a major purchase when you see the share price jump 3-4%. The announcement on yesterday was that SATS Airport services and SATS-Creuers will acquire Singapore Cruise Centre from Temasek.

Announcement here

SATS will effectively own 96.8% of it.

Singapore Cruise Centre have a license to operate for another 14 years. And perhaps it is likely that the license  will be extended (not sure if there is a licensing fee to it)

On a revenue of 45 mil and a profit before tax of 16.7 mil the margin comes up to 37%.  After a 17% tax rate, the margin becomes 30%.

At a purchase consideration of 101 mil the ROA comes to 12.8% which is very good.

13 mil looks like it will give a healthy boost to profit after tax for the Gateway services division, which is likely where it will go under.

Overall this will give a boost of 6% to profits.

But the bulk of the growth will have to come from tourism growth.

And since you need a license to operate the terminal, this is effectively a monopoly and margins should be protected.

The question is who stands to benefit more, Temasek or SATS. Why the hell is Temasek selling now. Probably a reallocation or the son making noise to ma ma to give him some toy to play with.

SATS have a PE of 17 times or 5.8% yield. That is an unlevered yield, which looks much better than SIAEC (brief look here) at 5.3%.

A look at the 5 year FCF seem to indicate that either management have too much cash and wants to distribute them or a risky way of allocating capital.

FCF is less than dividend paid out if you add up the 5 years (which should smooth out any fluctuations in  working capital)

On a Avg FCF/ Market Cap basis, the FCF yield is 4.4%, unlevered.

This deal more or less should boost FCF yield to 4.8%.

Good enough for you? Perhaps you may want to look deeper into it.

To get started with dividend investing, start by bookmarking my Dividend Stock Tracker which shows the prevailing yields of blue chip dividend stocks, utilities, REITs updated nightly.


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