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text Download Copy code 1Okay, here’s an attempt to create an SEO title and answer potential user questions based on the provided document: 2 3**SEO title:** 4SEO title: SATS Ltd (SATS SP): Embedded Resilience & FY26F Outlook – CGS International Analysis 5 6**Analysis based on the document:** 7 8Based on the document provided, here’s a summary of key points and potential user questions with answers: 9 10**Key Points:** 11 12* **Company:** SATS Ltd (SATS SP) 13* **Recommendation:** Reiterate Add 14* **Analyst:** TAY Wee Kuang and LIM Siew Khee, CGS International 15* **Key Themes:** Embedded resilience, cargo market share gains, FY26F outlook 16* **Target Price:** S\$3.60 17* **ESG:** Rated B- by LSEG 18 19**Potential User Questions & Answers:** 20 21**Q: What is the overall recommendation for SATS Ltd?** 22A: CGS International reiterates an “Add” recommendation for SATS Ltd. [[1]] 23 24**Q: What is the target price for SATS Ltd, and who set it?** 25A: The target price is S\$3.60, set by CGS International. [[1]] 26 27**Q: What is the basis for the target price?** 28A: The target price is DCF-based (Discounted Cash Flow), with a WACC of 12.2%. [[1]] 29 30**Q: What are the key factors driving the “Add” recommendation?** 31A: The key factor is SATS’s growing market share in cargo handling, which is expected to support earnings growth in FY26F, even with potential global cargo demand weakness. [[1]] 32 33**Q: What is SATS’s ESG rating?** 34A: SATS has an ESG combined score of B- by LSEG. [[1, 5]] 35 36**Q: What were SATS’s 4QFY3/25 financial results?** 37A: SATS reported a 4QFY3/25 net profit of S\$38.7m (+18.3% yoy). Revenue was S\$1.48bn (+10.4% yoy). [[1]] 38 39**Q: What are the potential risks to SATS’s performance?** 40A: Downside risks include margin compression from weaker operating leverage due to softening cargo volumes and a decline in the aviation travel industry due to an economic downturn. [[1]] 41 42**Q: What is the dividend payout?** 43A: SATS declared a final DPS of 3.5 Scts, bringing FY25 total DPS to 5.0 Scts, representing a payout ratio of 30.6%. [[1]] 44 45**Q: What is the earnings growth outlook?** 46A: The report anticipates a 3-year earnings CAGR of 15.0%. [[1]] 47 48**Q: Has the analyst revised earnings estimates?** 49A: Yes, FY26F-27F EPS estimates have been increased by 7.9-8.5%. FY28F estimates are introduced. [[1]] 50 51**Q: What are the catalysts for a potential re-rating?** 52A: Potential re-rating catalysts include an expanded footprint for cargo operations supporting new contract wins and a faster step-up in utilization of its new central kitchens across China and India. [[1]] 53 54**Q: What is SATS’s market capitalization?** 55A: The market cap is US\$3,444m / S\$4,428m. [[1]] 56 57**Q: Who are the major shareholders of SATS?** 58A: Temasek Holdings is a major shareholder, holding 40.4%. [[1]] 59 60**Q: What is SATS’s revenue in Mar-25A?** 61A: SATS’s revenue in Mar-25A is S\$5,821 million. [[1]] 62 63**Q: What are the peers of SATS?** 64A: Airports of Thailand is a peer. [[4]] 65 66**Q: What is the forecast dividend yield for Mar-26F?** 67A: The forecast dividend yield for Mar-26F is 1.85%. [[1]]

Posted on May 26, 2025 at 8:54 am (GMT+8)

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CGS International

May 26, 2025

SATS Ltd: Embedded Resilience to Tide Through FY26F

Key Takeaways from SATS Ltd’s 4QFY3/25 Performance

  • SATS Ltd reported a 4QFY3/25 net profit of S\$38.7m, which is an 18.3% year-over-year increase. This figure slightly exceeded the estimate of S\$34.2m, despite a lower contribution from share of associates and joint ventures (SoAJV) and impairment costs. [[1]]
  • Cargo tonnage handled by SATS has outpaced global cargo demand since 3QFY24, indicating market share gains. [[1]]
  • The company’s growing market share is expected to bolster earnings growth in FY26F, even amidst ongoing trade tensions with the US that threaten global cargo demand. [[1]]
  • The recommendation for SATS is reiterated as an “Add,” with a higher DCF-based target price of S\$3.60 (WACC: 12.2%). [[1]]

Consistent Revenue Growth in 4QFY25

  • SATS reported revenue of S\$1.48bn for 4QFY25, marking a 10.4% year-over-year growth. This growth rate is consistent with the revenue increases observed throughout FY25, where 1QFY25 to 3QFY25 saw growth rates between 12.5% and 15.5%. [[1]]
  • However, the 4QFY25 net profit of S\$38.7m (+18.3% yoy/-45.0% qoq) was lower compared to the prior three quarters, which ranged from S\$65.0m to S\$70.4m. This decrease is attributed to a lower contribution from SoAJV, which amounted to S\$21.4m (-30.7% yoy/-22.5% qoq), due to higher bonuses, and an impairment of S\$7.9m predominantly related to its cruise business in Hong Kong. [[1]]
  • EBIT margin also experienced a decline of 1.0% pts quarter-over-quarter, settling at 7.3% in 4QFY25. This is likely due to higher leases associated with expanded cargo operations at John F. Kennedy International Airport and Schiphol Airport. [[1]]
  • SATS declared a final dividend per share (DPS) of 3.5 Scts, bringing the total FY25 DPS to 5.0 Scts. This represents a payout ratio of 30.6%, surpassing the expected FY25F DPS of 3.0 Scts, which was based on a 20% payout ratio. [[1]]

Market Share Gains Offsetting Global Cargo Weakness in FY26F

  • SATS’s cargo tonnage handled has grown year-over-year, outpacing the International Air Transport Association’s (IATA) reported global cargo demand growth by an average of 5.5% pts since 3QFY24. This indicates that SATS is gaining market share. [[1]]
  • Despite escalating trade tensions between the US and its trading partners since Liberation Day in April, SATS has observed continued volume growth. This is likely due to supply chain re-routing and front-loading effects resulting from a temporary trade truce between the US and China. [[1]]
  • Management noted that the decline in e-commerce shipment volumes has been offset by an increase in shipments for automotive spare parts. Additionally, demand for time-sensitive shipments, such as fast fashion products, is expected to remain resilient for FY26F. [[2]]

Reiterating “Add” Recommendation with Higher Target Price

  • The “Add” call is reiterated based on the expectation that SATS will continue to experience growth in cargo volumes handled in FY26F, driven by its market share gains, even if cargo demand softens in the latter half of FY26F. [[2]]
  • FY26F-27F EPS estimates have been increased by 7.9-8.5%, and FY28F estimates have been introduced, implying a 3-year earnings CAGR of 15.0%. [[2]]
  • Potential catalysts for a re-rating include an expanded footprint for cargo operations that supports new contract wins and a faster ramp-up in the utilization of new central kitchens across China and India. [[2]]
  • Downside risks include margin compression from weaker operating leverage due to softening cargo volumes and a decline in the aviation travel industry caused by an economic downturn. [[2]]

Financial Performance Metrics

Key financial metrics for SATS Ltd include:

  • Current Price: S\$2.98 [[2]]
  • Target Price: S\$3.60 [[2]]
  • Previous Target Price: S\$3.05 [[2]]
  • Up/downside: 20.7% [[2]]
  • Market Cap: US\$3,444m, S\$4,428m [[2]]
  • Average Daily Turnover: US\$12.23m, S\$16.23m [[2]]
  • Current Shares O/S: 1,487m [[2]]
  • Free Float: 59.5% [[2]]

Key Changes Noted in This Report

  • FY26F EPS increased by 7.9%. [[2]]
  • FY27F EPS increased by 8.5%. [[2]]
  • FY28F estimates introduced. [[2]]

Major Shareholders

  • Temasek Holdings holds 40.4%. [[2]]

Financial Summary

(S\$m) Mar-24A Mar-25A Mar-26F Mar-27F Mar-28F
Revenue 5,150 5,821 6,015 6,307 6,775
Operating EBITDA 781 1,036 1,098 1,176 1,271
Net Profit 56.4 243.8 262.4 312.7 371.5
Core EPS (S\$) 0.05 0.16 0.18 0.21 0.25
Core EPS Growth 201% 11% 19% 19%
FD Core P/E (x) 56.62 18.95 17.09 14.34 12.07
DPS (S\$) 0.015 0.050 0.055 0.065 0.070
Dividend Yield 0.50% 1.68% 1.85% 2.18% 2.35%
EV/EBITDA (x) 7.99 5.81 5.25 4.67 4.01
P/FCFE (x) 6.57 7.11 8.33 8.04 6.64
Net Gearing 80.6% 66.6% 54.9% 44.0% 30.9%
P/BV (x) 1.87 1.72 1.60 1.49 1.37
ROE 3.3% 9.5% 9.8% 10.9% 11.9%

Analyst Information

Valuation Analysis

  • The target price of S\$3.60 implies a P/E ratio of 17.3x FY27F, which aligns with its pre-Covid-19 mean. This valuation is considered fair, reflecting SATS’s current net debt position post-acquisition of Worldwide Flight Services (WFS) against its pre-Covid-19 net cash position. [[3]]

FY25 Results Compared to Expectations

  • FY25 revenue was slightly ahead of expectations, reaching 103.2%/103.6% of the research firm’s/Bloomberg consensus’ FY25F estimates, driven by strong revenue momentum in the food solutions segment. [[3]]
  • FY25 core net profit of S\$244.5m was in line, achieving 102.2%/99.0% of the research firm’s/Bloomberg consensus’ FY25F estimates. [[3]]

Key Observations from 4QFY25

  • Revenue grew by 10.4% year-over-year to S\$1.48bn, supported by robust growth in both food solutions and gateway services segments. [[3]]
  • EBIT grew by 22.0% year-over-year, benefiting from better operating leverage. However, it declined 14.9% quarter-over-quarter due to a seasonally weaker quarter for the cargo business. [[3]]
  • Contribution from associates and joint ventures decreased by 30.7% year-over-year and 22.5% quarter-over-quarter due to bonus accrual from strong financial performance. [[3]]
  • Net profit of S\$38.7m was slightly ahead of the estimated S\$34.2m, driven by stronger-than-expected revenue momentum in the food solutions business. [[3]]
  • SATS recognized non-operating expenses of S\$7.9m due to an impairment on its Hong Kong cruise business. [[3]]

Earnings Revision

S\$m FY26F FY27F FY28F FY26F FY27F FY28F FY26F FY27F FY28F
Revenue 6,014.7 6,307.3 6,775.1 5,465.6 5,730.0 N.A. 10.0% 10.1% N.A.
Operating EBIT 514.3 559.6 619.3 472.3 515.8 N.A. 8.9% 8.5% N.A.
EBITDA 1,098.2 1,176.3 1,270.9 1,070.6 1,143.7 N.A. 2.6% 2.8% N.A.
Associates contribution 120.0 130.0 140.0 120.0 130.0 N.A. 0.0% 0.0% N.A.
PBT 392.2 462.1 543.8 368.1 432.5 N.A. 6.5% 6.8% N.A.
Tax rate 28.0% 28.0% 28.0% 30.0% 30.0% N.A. -2.0% pts -2.0% pts N.A.
Core profit 262.4 312.7 371.5 242.7 287.7 N.A. 8.1% 8.7% N.A.
Shares outstanding (m) 1,489.8 1,489.8 1,489.8 1,487.3 1,487.3 N.A. 0.2% 0.2% N.A.
Core EPS (Scts) 17.61 20.99 24.94 16.32 19.34 N.A. 7.9% 8.5% N.A.

Discounted Cash Flow Model Highlights

  • The discounted cash flow model provides a detailed valuation for SATS, incorporating various financial forecasts and assumptions. [[4]]
  • Key inputs include EBIT, taxes, depreciation and amortization, changes in net working capital, and capital expenditures. [[4]]
  • The model projects free cash flow to the firm (FCFF) from FY26F through FY36F, with a terminal growth rate of 1.0%. [[4]]
  • A weighted average cost of capital (WACC) of 12.2% is used for discounting the cash flows. [[4]]
  • The equity value per share is estimated at S\$3.60. [[4]]

Peer Comparison

Company Ticker Recom. Price (lcl curr) TP (lcl curr) Market Cap (US\$ m) CY25F CY26F 3-year EPS CAGR (% ) CY25F CY26F CY25F CY26F CY25F CY26F CY25F CY26F CY25F CY26F
SATS Ltd SATS SP Add 2.98 3.60 3,444 17.5 14.9 23.3% 57.6% 46.5% 1.6 1.5 9.5% 10.5% 5.4 4.8 1.8% 2.1%
Airports of Thailand AOT TB Hold 34 35.00 14,950 38.6 32.3 N.A. -13.2% -12.4% 3.7 3.4 9.9% 10.9% 12.1 10.9 2.2% 2.6%

ESG Analysis

  • SATS was rated B- for its ESG combined score by LSEG in FY24. [[5]]
  • Environmental: C+ (weightage 29.11%) [[5]]
  • Social: C+ (weightage 42.72%) [[5]]
  • Governance: A- (weightage 28.17%) [[5]]
  • SATS’s continued commitment to sustainability, especially in developing smart infrastructure, reducing food and packaging waste, and nurturing skills for the future, has streamlined the group’s ESG efforts. [[5]]
  • SATS will continue to work at the industry level to enable greater use of renewable energy, electric vehicles, sustainable packaging, alternative proteins, and skill upgrading. [[5]]

ESG Implications and Highlights

  • SATS has maintained its combined ESG score of B- since FY3/21, with a slight improvement in its Environmental pillar score from C in FY22 to C+ in FY23. [[5]]
  • The improvement was due to lower CO2 emissions per revenue and reduced hazardous waste production. [[5]]
  • SATS has started disclosing its upstream and downstream emissions from FY23, which has improved its scores due to better disclosures. [[5]]
  • Energy-saving efforts could lead to margin expansion over time, although potential cost savings from these initiatives have not been factored into current forecasts. [[5]]
  • SATS is ranked the second-highest among its peers in its ESG combined score, second for the Environmental and Social pillars, and first for the Governance pillar. [[5]]
  • The social score improved from 41.92 in FY22 to 48.97 in FY23, despite high employee turnover in the industry during the Covid-19 pandemic. [[5]]
  • The workforce score stood at C+ as of FY24, maintained from FY22, but declined from B+ in FY21 due to higher employee turnover and lower employee satisfaction. [[5]]
  • Employee training efforts are expected to improve workforce productivity and satisfaction. [[5]]

Governance Pillar Trends

  • SATS’s improved Governance pillar score of A- in FY24 was a standout among its peers due to its shareholders’ rights, equal voting rights, and shareholder engagement policies. [[5]]
  • SATS also improved its stance on shareholders’ vote on executive pay. [[5]]
  • There was an improvement from C+ to B+ in its shareholders score following the appointment of a new auditor and improvement in its revenue. [[5]]
  • The ramp-up in its shareholder aspect under the Governance pillar will instill greater shareholder confidence and satisfaction in the group. [[5]]

Profit & Loss

(S\$m) Mar-24A Mar-25A Mar-26F Mar-27F Mar-28F
Total Net Revenues 5,150 5,821 6,015 6,307 6,775
Gross Profit 1,824 2,114 2,190 2,292 2,428
Operating EBITDA 781 1,036 1,098 1,176 1,271
Depreciation And Amortisation -536 -561 -584 -617 -652
Operating EBIT 244 476 514 560 619
Financial Income/(Expense) -237 -231 -242 -228 -215
Pretax Income/(Loss) from Assoc. 110 114 120 130 140
Non-Operating Income/(Expense) -1 0 0 0 0
Profit Before Tax (pre-EI) 116 360 392 462 544
Taxation -56 -99 -110 -129 -152
Exceptional Income – post-tax 0 0 0 0 0
Profit After Tax 61 261 282 333 392
Minority Interests -7 -17 -20 -20 -20
FX Gain/(Loss) – post tax
Other Adjustments – post-tax 3 0 0 0 0
Net Profit 56 244 262 313 372
Recurring Net Profit 79 237 262 313 372
Fully Diluted Recurring Net Profit 79 237 262 313 372
Normalised Net Profit 61 261 282 333 392
Fully Diluted Normalised Profit 56 244 262 313 372

Cash Flow

(S\$m) Mar-24A Mar-25A Mar-26F Mar-27F Mar-28F
EBITDA 780.6 1,036.2 1,098.2 1,176.3 1,270.9
Cash Flow from Invt. & Assoc. (110.0) (110.0) (120.0) (130.0) (140.0)
Change In Working Capital (89.4) (41.1) 64.6 12.9 23.5
Other Operating Cashflow 112.5 180.9 120.0 130.0 140.0
Net Interest (Paid)/Received (154.0) (129.5) (123.2) (110.3) (100.0)
Tax Paid (27.6) (45.4) (109.8) (129.4) (152.3)
Cashflow From Operations 512.1 891.1 929.8 949.5 1,042.1
Capex (185.6) (221.7) (250.0) (250.0) (225.0)
Disposals Of FAs/subsidiaries 58.4 20.4 0.0 0.0 0.0
Acq. Of Subsidiaries/investments 126.4 (1.5) 0.0 0.0 0.0
Other Investing Cashflow 68.8 102.0 58.2 58.2 58.2
Cash Flow From Investing 68.0 (100.8) (191.8) (191.8) (166.8)
Debt Raised/(repaid) 96.1 (159.6) (200.0) (200.0) (200.0)
Proceeds From Issue Of Shares 0.0 (92.0) 0.0 0.0 0.0
Shares Repurchased 0.0 (10.6) 0.0 0.0 0.0
Dividends Paid 0.0 (44.7) (81.9) (96.8) (104.3)
Other Financing Cashflow (388.1) (458.3) (441.1) (441.1) (441.1)
Cash Flow From Financing (292.0) (765.2) (723.0) (737.9) (745.4)
Total Cash Generated 288.1 25.1 15.0 19.8 129.9
Free Cashflow To Equity 676.2 630.7 538.0 557.7 675.3
Free Cashflow To Firm 734.1 919.8 861.2 868.0 975.3

Balance Sheet

(S\$m) Mar-24A Mar-25A Mar-26F Mar-27F Mar-28F
Total Cash And Equivalents 659 694 709 729 859
Total Debtors 1,138 1,165 1,318 1,382 1,485
Inventories 73 86 85 89 96
Total Other Current Assets 79 107 107 107 107
Total Current Assets 1,950 2,052 2,218 2,306 2,546
Fixed Assets 796 860 924 972 980
Total Investments 785 768 829 901 983
Intangible Assets 3,511 3,467 3,391 3,315 3,239
Total Other Non-Current Assets 1,437 1,736 1,714 1,676 1,617
Total Non-current Assets 6,530 6,831 6,859 6,864 6,819
Short-term Debt 1,100 1,713 1,863 1,863 1,863
Total Creditors 1,382 1,393 1,610 1,691 1,824
Other Current Liabilities 308 387 409 405 400
Total Current Liabilities 2,791 3,493 3,882 3,959 4,087
Total Long-term Debt 1,622 825 475 275 75
Total Other Non-Current Liabilities 1,507 1,796 1,751 1,732 1,711
Total Non-current Liabilities 3,130 2,621 2,226 2,007 1,786
Total Provisions 0 0 0 0 0
Total Liabilities 5,921 6,114 6,108 5,965 5,873
Shareholders’ Equity 2,375 2,587 2,767 2,983 3,250
Minority Interests 185 182 202 222 242
Total Equity 2,560 2,769 2,969 3,205 3,492

Key Ratios

Mar-24A Mar-25A Mar-26F Mar-27F Mar-28F
Revenue Growth 193% 13% 3% 5% 7%
Operating EBITDA Growth 511% 33% 6% 7% 8%
Operating EBITDA Margin 15.2% 17.8% 18.3% 18.6% 18.8%
Net Cash Per Share (S\$) -1.39 -1.24 -1.09 -0.95 -0.72
BVPS (S\$) 1.60 1.74 1.86 2.00 2.18
Gross Interest Cover 0.95 1.94 2.12 2.46 2.87
Effective Tax Rate 48.0% 27.5% 28.0% 28.0% 28.0%
Net Dividend Payout Ratio 39.6% 30.6% 31.2% 31.0% 28.1%
Accounts Receivables Days 57.55 72.22 75.35 78.14 77.45
Inventory Days 7.80 7.82 8.13 7.88 7.77
Accounts Payables Days 104.8 136.6 143.3 150.0 148.0
ROIC (%) 8.62% 6.45% 6.56% 7.30% 8.19%
ROCE (%) 5.9% 9.3% 9.7% 10.5% 11.5%
Return On Average Assets 2.84% 4.94% 5.09% 5.44% 5.90%

Key Drivers

Mar-24A Mar-25A Mar-26F Mar-27F Mar-28F
Revenue growth (%) 192.9% 13.0% 3.3% 4.9% 7.4%
Operating margin (%) 4.7% 8.2% 8.6% 8.9% 9.1%


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