SINGAPORE - Shares of Sats plunged sharply to a two-year low after the stock resumed trading on Thursday morning, following news of the company’s deal to buy the world’s largest air cargo handler for $1.64 billion.

The ground handling and catering provider announced on Wednesday it will acquire Paris-based Worldwide Flight Services (WFS).

The combined entity's network will cover trade routes responsible for more than 50 per cent of global air cargo volume.

The mainboard-listed company’s shares sank as soon as trading began on Thursday, and were down 80 cents, or 20.7 per cent, at $3.07. 

The last time the counter went below this level was in the midst of the Covid-19 pandemic in September 2020. 

Sats was also the third-most heavily traded stock by value and volume with 51.7 million shares changing hands. 

The sell-down comes after the company revealed that the deal will be partially financed with a $1.7 billion equity fund-raising, with the balance coming from internal cash resources. 

“The market does not like rights issues,” said the executive director of a local brokerage house.

“You saw this with Sembcorp Marine, Singapore Airlines and other stocks. That said, this deal is a good one for Sats in the longer term, as it makes the company a formidable global air cargo player. But the market can be short-sighted at times.”

Several investment houses, such as UOB Kay Hian and DBS Bank, are said to be reviewing their Sats’ valuation metrics.

OCBC Securities downgraded the stock’s target price to $3.50 from $4.80 previously, citing post-cyclical peak in cargo and near-term earnings headwinds.

But CGS-CIMB gave it a target price of $4.47, while Smart Karma gave it a pro-forma price of $4.95.

Despite the negativity at the moment, many market insiders seem sanguine about the longer term prospects for the company, and said investors will ultimately make a judgment on the merits of the deal and its contribution to the bottom line. 

This story has been edited for clarity.