CGS International Securities
August 22, 2025
SATS Ltd: Strong Cargo Growth, Margin Upside and ESG Leadership – A Comprehensive Financial Analysis
Executive Summary
SATS Ltd, a leading player in Singapore’s gateway and food solutions services, has delivered a solid set of results in 1QFY26, with profit and cargo volumes outpacing expectations. The company continues to expand its global footprint, optimize operations, and enhance margins, positioning itself as a high-conviction Add for investors. This in-depth report covers SATS Ltd’s recent financial performance, strategic moves, ESG profile, peer comparison, and risk outlook, providing investors with actionable insights for decision-making.
1. SATS Ltd: 1QFY26 Performance Overview
SATS posted a 1QFY26 PATMI (Profit After Tax and Minority Interests) of S\$70.9m, squarely within the expected S\$65m-70m range and representing 27% of both CGS International and Bloomberg consensus FY26 forecasts. Key drivers included robust cargo handling, margin improvement in food solutions, and strategic workforce management in response to market disruptions.
| Metric |
1QFY26 |
4QFY25 |
1QFY25 |
YoY Change |
QoQ Change |
| Revenue (S\$m) |
1,506.3 |
1,476.7 |
1,370.4 |
+9.9% |
+2.0% |
| Food Solutions Revenue (S\$m) |
328.3 |
331.1 |
310.8 |
+5.6% |
-0.8% |
| Gateway Services Revenue (S\$m) |
1,178.0 |
1,145.5 |
1,059.5 |
+11.2% |
+2.8% |
| EBITDA (S\$m) |
273.8 |
257.5 |
249.1 |
+9.9% |
+6.3% |
| Net Profit (S\$m) |
70.9 |
38.7 |
65.0 |
+9.1% |
+83.2% |
2. Gateway Services: Cargo and Ground Handling Drive Growth
– Gateway services revenue rose 11.2% YoY to S\$1.18bn, powered by a 12.2% YoY increase in cargo handling revenue and a 9.2% increase in ground handling revenue. – Cargo volumes surged 10.4% YoY, outpacing global cargo growth for seven consecutive quarters. – EBIT margin for gateway services improved by 1.0 percentage point to 8.7%. – SATS strategically retained US cargo handling staff in response to Liberation Day tariffs, enabling rapid ramp-up as cargo demand rebounded.
3. Food Solutions: Operational Consolidation and Margin Gain
– Food solutions revenue increased 5.6% YoY to S\$328.3m. – Aviation meal volumes rose 5.6% YoY, but non-aviation meal volumes fell 10.6% YoY due to the consolidation of Kunshan central kitchen into the Tianjin facility in China. – The Kunshan closure improved operating leverage, boosting food solutions EBIT margin by 0.8 percentage points to 8.7%. – A new Starbucks China contract is expected to further utilize the Tianjin kitchen and support incremental profitability from 2QFY26 onwards.
4. Financial Summary: Upward Earnings Revisions and Forecasts
SATS’s earnings outlook has been raised for FY26F-FY28F on the back of stronger revenue momentum.
| FY |
Revenue (S\$m) |
Operating EBITDA (S\$m) |
Net Profit (S\$m) |
Core EPS (S\$) |
FD Core P/E (x) |
DPS (S\$) |
Dividend Yield (%) |
| Mar-24A |
5,150 |
781 |
56.4 |
0.05 |
61.94 |
0.015 |
0.46% |
| Mar-25A |
5,821 |
1,036 |
243.8 |
0.16 |
20.06 |
0.050 |
1.53% |
| Mar-26F |
6,114 |
1,103 |
265.9 |
0.18 |
18.44 |
0.055 |
1.69% |
| Mar-27F |
6,412 |
1,181 |
316.4 |
0.21 |
15.50 |
0.065 |
1.99% |
| Mar-28F |
6,886 |
1,276 |
375.5 |
0.25 |
13.06 |
0.070 |
2.15% |
EPS estimates for FY26F, FY27F, and FY28F increased by 1.4%, 1.2%, and 1.1% respectively.
Target price raised to S$3.83, implying 17.3% upside from the current price of S$3.26.
5. Discounted Cash Flow Valuation
SATS’s equity value was derived using a DCF model with a WACC of 12.2% and a terminal growth rate of 2.0%.
| Parameter |
Value |
| Risk-Free Rate |
4.0% |
| Market Risk Premium |
8.0% |
| Beta |
1.3 |
| Cost of Equity |
14.4% |
| Cost of Debt (after-tax) |
3.2% |
| Terminal Growth Rate |
2.0% |
| Equity Value Per Share |
S\$3.83 |
6. Peer Comparison: SATS vs Airports of Thailand
The report compares SATS Ltd with Airports of Thailand (AOT TB), highlighting SATS’s superior growth prospects and governance scores.
| Company |
Ticker |
Recommendation |
Price (lcl curr) |
Target Price |
Market Cap (US\$m) |
FD Core P/E (CY25F) |
FD Core P/E (CY26F) |
Dividend Yield (CY25F) |
Dividend Yield (CY26F) |
| SATS Ltd |
SATS SP |
Add |
3.26 |
3.83 |
3,782 |
18.8 |
16.1 |
1.6% |
1.9% |
| Airports of Thailand |
AOT TB |
Reduce |
37.75 |
25.00 |
16,530 |
29.5 |
29.8 |
2.0% |
2.0% |
7. ESG Profile: SATS’s Sustainability Commitment and Governance Strength
– SATS received a C+ combined ESG score from LSEG in FY25, ranking second among peers overall and first in Governance. – Environmental score: C; Social score: C; Governance score: B. – Environmental initiatives include smart infrastructure, waste reduction, renewable energy, electric vehicles, and sustainable packaging. – Social pillar highlighted improved workforce productivity and satisfaction via employee training, despite high turnover during the Covid-19 pandemic. – Governance pillar saw improvement due to shareholder rights policies and executive pay transparency, boosting shareholder confidence.
8. Risk Factors and Catalysts
– Catalysts for re-rating include increased revenue from food solutions and new cargo contracts. – Downside risks: Margin compression from weakening cargo volumes and aviation travel industry slowdown amidst global economic downturn. – SATS maintains healthy financials, with net gearing expected to decrease from 80.6% in Mar-24A to 30.6% in Mar-28F.
9. Key Financial Ratios and Balance Sheet Highlights
| Metric |
Mar-24A |
Mar-25A |
Mar-26F |
Mar-27F |
Mar-28F |
| BVPS (S\$) |
1.60 |
1.74 |
1.86 |
2.01 |
2.19 |
| Net Cash Per Share (S\$) |
-1.39 |
-1.24 |
-1.09 |
-0.94 |
-0.72 |
| ROE (%) |
3.3 |
9.9 |
9.9 |
11.0 |
12.0 |
| Net Gearing (%) |
80.6 |
66.6 |
54.8 |
43.7 |
30.6 |
10. Analyst Views and Major Shareholders
– SATS Ltd receives “Add” recommendations from both CGS International and consensus analysts, with no hold or sell calls. – Temasek Holdings is the major shareholder, holding 40.4% of SATS.
Conclusion: SATS Ltd Poised for Outperformance
SATS Ltd demonstrates resilience and growth across its gateway and food solutions segments, outpacing industry benchmarks and maximizing margins through strategic operational moves. Enhanced ESG credentials, strong governance, and a robust financial outlook further solidify its position as a high-conviction pick for investors. With an attractive upside and positive catalysts ahead, SATS Ltd stands out as a leader in Singapore’s aviation and food services industry.
Broker Coverage Information
CGS International Securities August 22, 2025
