DBS Stock Pulse: FedEx sounds global trade warning: SATS under pressure, but negatives likely priced in
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Group Research - Equities21 Mar 2025
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Stocks to Watch

SATS

FedEx sounds global trade warning: SATS under pressure, but negatives likely priced in

  • Fedex’s latest warning reinforces the concern that global trade and air freight remain under pressure, signalling muted air freight movements at SATS (50% exposure to Cargo)
  • Fedex reduced its full year guidance for the third consecutive quarter
  • FY25 adjusted EPS lowered to USD18-18.60 (from USD19-20) due to ongoing challenges in the global industrial economy, inflationary pressures, and uncertainties surrounding global trade policies
  • Key factors to watch for SATS include:
    - E-commerce, making up 20-25% of volumes, could be impacted, as Bloomberg reported of a nearly 5% y/y decline in small package shipments from China to the US in February 2025 due to levies

- Effects of softer cargo could be cushioned by strong growth in other businesses (food services and ground handling), WFS synergies, and interest savings

  • Trade concerns may weigh on sentiment in the near term, but negatives appear mostly priced in with SATS’ share price down 24% from its peak in late 2024
  • SATS is trading below -1.0 SD on a forward EV/EBITDA basis
  • Technical outlook – SGD2.86 to SGD2.92 may present better levels to accumulate
  • Our earlier view for SATS’ share price to turn near-term sideways from SGD3.03 to SGD3.28 did pan out, but we observe ‘lower-highs’ over the past 3 weeks
  • We now prefer to accumulate on any weakness to SGD2.86-2.92 that coincides with a key 150% to 161.8% Fibonacci extension

 
IHH Healthcare

Hospital operations in Turkey remain steady but Lira weakness could skew risks to the downside

  • Turkish lira tumbles on political instability due to the arrest of Istanbul mayor
  • Hospital operations unlikely to be impacted but there could be some downside bias in Turkey contributions given translation losses
  • Mitigating factors include foreign-patient revenue paid in USD or EUR, which reduces currency-translation impact for Turkish operations
  • Maintain BUY with unchanged TP of MYR8.20/SGD2.48

 

 



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Note: All views expressed are current as at the stated date of publication.

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