SATS Ltd: Tempered Growth Expectations Amidst Global Headwinds

CGS International | April 10, 2025

Uncertain Macroeconomic Outlook Dents SATS’s Growth Prospects

SATS Ltd, a leading provider of aviation services, faces a challenging period ahead as the global economy grapples with mounting uncertainty. Our analysts believe the company’s earnings growth could stall in FY3/26F, as the aviation industry navigates through a potential downturn.

Global Trade Tensions to Weigh on Air Cargo Demand

We expect global air cargo demand to decline by 10% year-over-year in CY25F, as the ongoing trade tensions between the US and its major trading partners escalate. SATS’s cargo-handling business, which accounts for 50% of its revenue, is likely to be significantly impacted by this downturn in global trade.

Economic Slowdown to Dampen Global Travel Demand

The potential economic fallout from the trade war could also lead to softer global air travel demand, affecting SATS’s ground-handling and aviation catering businesses, which contribute 26% and 16% of its revenue, respectively. We assume SATS’s ground-handling volumes will remain flat year-over-year in FY26F, while its food solutions business will see growth halved as the decline in aviation food is offset by the ramp-up of its non-aviation food operations.

Maintain “Add” Rating, Revised Target Price of S\$3.05

We believe SATS’s current share price, trading at an 8-year trough EV/EBITDA multiple, already prices in its dented growth prospects. We maintain our “Add” rating on the stock, with a revised DCF-based target price of S$3.05, implying a FY26F EV/EBITDA of 6x.

Resilient Trade Volumes and Tariff Resolution as Potential Catalysts

Re-rating catalysts for SATS include resilient global trade volumes and a resolution of the tariff tensions between the US and its trading partners. Downside risks include a more severe global recession leading to a greater-than-expected decline in the aviation industry, as well as delays in ramping up utilization at its new central kitchens, resulting in softer margins.

SATS’s Growing Network to Support Long-Term Profitability

Despite the near-term headwinds, we believe SATS’s growing network, particularly after its acquisition of Worldwide Flight Services (WFS) in FY23, will position the company for market share gains to support better profitability beyond FY26F.

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