SINGAPORE (Jan 12): Maybank Kim Eng is keeping its “sell” call on gateway and food solutions provider SATS with an unchanged target price of S$3.76.

Maybank analysts Derrick Heng and Neel Sinha say the stock is “fully priced” and recommend that investors take profit.

“While SATS is viewed as a good proxy for aviation growth in the region, we believe its stock is priced for perfection, with valuations at 21x FY18E P/E, near its 10-year peak,” they say in a report on Jan 2.

Heng and Sinha say SATS’s performance over the past year was lifted by strong margin expansion primarily led by the deconsolidation of its low-margin food-distribution business to a joint venture.

“However, we believe further material improvements will be difficult,” the analysts say. “[The margin expansion] will not be repeated.”

Meanwhile, even the impending opening of Singapore’s fourth airport terminal, T4, is unlike to give SATS a further boost.

“We believe terminal-handling capacity is not a limitation to growth today and do not expect the opening to raise air traffic materially,” says Heng and Sinha.

Furthermore, tourism data has pointed to Singapore visitor growth slowing in recent months.

In addition, Temasek Holdings’ recent sale of 23 million shares at S$4.75 a share is likely to cap any upside to the stock.

With SATS now trading above Temasek’s sale price , Heng and Sinha say they “cannot rule out further share sales to capitalise on its strong performance in the past year”.

As at 4.20pm, SATS is trading 1 Singapore cent higher at S$5.04.