We expect SAT to achieve a mild bottom-line recovery in 2H20, assuming that the economy improves materially and COVID-19 is beaten in most of Thailand’s major export markets for cars and pick-ups. The stock price has dived from Bt19.80 in July 2019 to Bt10.40. We assume that the DPS will slump from Bt1.35 for 2019 to just Bt0.30 for 2020 (a yield of 3.2%). Our earnings forecast cut prompted us to reduce our YE20 target price from Bt11.70 to Bt7.10 (pegged to SAT’s mean historical PER of 10.6x). The dividend yield outlook is only modest and there are downside risks tied to the possibility of further delays to new orders during 2H20, so we have downgraded our call from HOLD to SELL.
2Q20 loss was much deeper than modeled
SAT posted a 2Q20 net loss of Bt148m, a reversal from net profits of Bt170m for 2Q19 and Bt191m for 1Q20. The bottom-line was 152% deeper in the red than our estimate of a loss of Bt58m, due mainly to heavier OPEX than expected. The firm marked 2Q20 OPEX of Bt811m; we had assumed only Bt600m. 1H20 earnings dived 91% YoY to Bt43m, which represents just 9% of our old 2020 forecast of Bt470m.