With the full consolidation of SFI, revenue jumped 44% to $352m while net profit rose 17% YoY to $40.4m, in-line with our forecasts. Annualised, this points to $1.4bn in full year revenue and $162m in net profit. We are forecasting full year revenue of $1.47bn and profit of $170m, which captures $6.5m in annual cost savings from the integration of SFI. SATS has already realised $2.6m of these savings in 1Q10.

Non-aviation accounted for 40% of revenue (up from 2% in 1Q09) as aviation revenue fell 12% YoY. SFI accounted for 38% of sales and an estimated 21% of net profit. Excluding SFI and adjusted for exceptional items, we estimate profits fell 33% YoY to $25-26m. In this aspect, the acquisition has allowed SATS to more than offset the impact of the aviation slump. More significantly, FCF was maintained at $75m (-5% YoY), key to its maintaining a high dividend.

Although sales fell 20% YoY, we estimate SFI’s profits jumped 60% to $8.6m, on the closure of loss-making businesses and market share gains. This implies a full year profit of $34m vs FY08’s $28m. With 1Q10 seasonally weak, $40m is not unreasonable to expect, suggesting a valuation of 12.5x earnings instead of the 18x implied when the deal was announced. SATS itself was trading at 12-13x PE at the time.

SATS revealed several new contracts pertaining to the food business, namely the supply of employee and patient meals to Altira Macau casino (formerly Crown Macau) and St Andrew’s Hospital. It also clinched an exclusive contract to launder bed sheets for Resorts World Sentosa. Management is pursuing further deals with several other Macau casinos as well as the two Singapore casinos which could be larger in value.

We up our FY10 forecast by 2% to account for the new contracts and also raise our target price slightly to $2.55 (from $2.51 previously). We reckon there will be further upside from additional contract flows, such as the supply of employee meals to the Singapore casinos, which we have not yet factored in. With catalysts such as the SIA divestment of SATS shares likely to have a positive effect, we maintain our BUY call on SATS.