CGS International
May 26, 2025
SATS Ltd: Market Share Gains and Resilience Propel Growth Outlook for FY26
Overview: Strong Momentum Amid Global Uncertainties
SATS Ltd, a leading airport services and food solutions provider in Singapore, has demonstrated robust financial and operational performance in its latest fiscal year, despite a challenging macroeconomic environment and ongoing global trade tensions. This report reviews SATS’s FY25 results, market positioning, growth drivers, financial highlights, and ESG performance, providing a comprehensive outlook for investors and financial market watchers.
Financial Performance: Consistent Revenue Growth and Improved Profitability
- 4QFY25 Net Profit: S\$38.7 million (+18.3% year-on-year), outperforming analyst estimates, though down 45.0% quarter-on-quarter due to seasonally lower contributions from associates and joint ventures, and a S\$7.9 million impairment on the Hong Kong cruise business.
- FY25 Revenue: S\$5.82 billion (+13.0% year-on-year), slightly ahead of consensus expectations due to strong food solutions segment growth (+22.0% year-on-year).
- EBITDA: FY25 EBITDA reached S\$1.04 billion (+32.7% year-on-year).
- Net Profit: S\$243.8 million for FY25, a significant rebound from S\$56.4 million in FY24.
- Dividend: Final dividend per share (DPS) of 3.5 Singapore cents, bringing total FY25 DPS to 5.0 cents (payout ratio: 30.6%).
| 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 |
| Dividend (S\$) |
0.015 |
0.050 |
0.055 |
0.065 |
0.070 |
| Dividend Yield (%) |
0.50 |
1.68 |
1.85 |
2.18 |
2.35 |
| Net Gearing (%) |
80.6 |
66.6 |
54.9 |
44.0 |
30.9 |
| ROE (%) |
3.3 |
9.5 |
9.8 |
10.9 |
11.9 |
Operational Highlights: Cargo Market Share Gains and Resilience
- Market Share Growth: SATS’s cargo tonnage handled grew faster than global industry averages since 3QFY24, outpacing IATA’s reported global cargo demand by 5.5 percentage points on average.
- Segment Breakdown:
- Food Solutions: Revenue grew to S\$1.35 billion in FY25 (+22.0% year-on-year), driven by new contract wins and improving utilization of central kitchens in China and India.
- Gateway Services: Revenue reached S\$4.47 billion in FY25 (+10.6% year-on-year), benefitting from expanded cargo operations at key international airports.
- Business Mix Evolution: Decline in e-commerce shipments was offset by increased demand for automotive spare parts and resilient time-sensitive shipments (e.g., fast fashion).
Strategic Outlook: Upgraded Guidance and Growth Catalysts
- Target Price Raised: The broker has raised the discounted cash flow-based target price to S\$3.60 (from S\$3.05), implying a 17.3x FY27F P/E, in line with pre-pandemic averages.
- EPS Upgrades: FY26F and FY27F EPS estimates have been raised by 7.9% and 8.5% respectively, with a new FY28F estimate introduced, projecting a 3-year earnings CAGR of 15.0%.
- Growth Catalysts:
- Further expansion of cargo operations and new contract wins.
- Accelerated ramp-up in central kitchen utilization across China and India.
- Resilience in time-sensitive and diversified cargo segments.
- Risks:
- Potential margin compression from weaker operating leverage if cargo volumes soften.
- Downturn in aviation travel demand due to broader economic headwinds.
Peer Comparison: SATS vs. Airports of Thailand
| Company |
Ticker |
Recom. |
Price |
Target Price |
Market Cap (US\$m) |
FY25F P/E (x) |
FY26F P/E (x) |
3-year EPS CAGR (%) |
ROE (%) |
EV/EBITDA (x) |
Div. Yield (%) |
| SATS Ltd |
SATS SP |
Add |
2.98 |
3.60 |
3,444 |
17.5 |
14.9 |
23.3 |
9.5 |
5.4 |
1.8 |
| Airports of Thailand |
AOT TB |
Hold |
34.00 |
35.00 |
14,950 |
38.6 |
32.3 |
N.A. |
9.9 |
12.1 |
2.2 |
SATS is trading at a significant discount to Airports of Thailand on P/E and EV/EBITDA multiples, but boasts a higher EPS growth outlook and competitive dividend yield.
Valuation: Discounted Cash Flow Model and Key Metrics
The DCF valuation for SATS utilizes a Weighted Average Cost of Capital (WACC) of 12.2%. Key assumptions include:
- Risk-free rate: 4.0%
- Market risk premium: 8.0%
- Beta: 1.3
- Terminal growth rate: 1.0%
- Cost of equity: 14.4%
- After-tax cost of debt: 3.2%
- Target debt/equity ratio: 20%
The resulting equity value per share is S\$3.60, supporting the broker’s revised target price.
ESG Profile: Sustainability, Social Responsibility, and Governance
- LSEG ESG Score: SATS maintains a B- overall rating, with Environmental and Social pillars at C+ and Governance at A-.
- Environmental Initiatives:
- Lower CO2 emissions per revenue and significant reduction in hazardous waste (62.3 tonnes in FY23 vs. 135.0 tonnes in FY22).
- Started disclosing upstream and downstream emissions, enhancing transparency.
- Focus on smart infrastructure, renewable energy, electric vehicles, and sustainable packaging.
- Social Impact:
- Social score improved to 48.97 in FY23 from 41.92 in FY22, despite industry-wide high employee turnover during the pandemic.
- Continued investment in workforce training to boost productivity and satisfaction.
- Governance Excellence:
- Governance pillar rated A-, highest among peers, bolstered by strong shareholder rights and engagement policies.
- Recent improvements include new auditor appointments and greater shareholder involvement in executive pay decisions.
Key Trends, Ratios, and Financial Health
- Revenue Growth: 13.0% in FY25, forecasted 3.3% in FY26, with acceleration to 7.4% by FY28 as new initiatives scale.
- EBITDA Margins: Improving from 15.2% (FY24) to 17.8% (FY25), and expected to reach 18.8% (FY28).
- Net Gearing: Gradual deleveraging from 80.6% (FY24) to 30.9% (FY28), reflecting strong cash flows and prudent capital management.
- ROE: Projected to rise from 3.3% (FY24) to 11.9% (FY28), indicating improved profitability and capital efficiency.
- Dividend Payout: Payout ratio expected to remain above 28% through FY28, supporting income-focused investors.
Cash Flow and Balance Sheet Strength
- Operating Cash Flow: S\$891.1 million in FY25, forecasted to exceed S\$1.0 billion by FY28.
- Capex: S\$221.7 million in FY25, with continued investment of S\$225-250 million annually through FY28 to support growth and modernization.
- Free Cash Flow to Equity: S\$630.7 million in FY25, expected to rise to S\$675.3 million by FY28.
- Balance Sheet:
- Total assets: S\$8.88 billion in FY25, with total equity strengthening to S\$3.49 billion by FY28.
- Cash and equivalents: S\$694 million in FY25, projected to rise to S\$859 million by FY28.
Shareholder Structure and Analyst Coverage
- Major Shareholder: Temasek Holdings (40.4% stake)
- Free Float: 59.5%
- Analyst Ratings: 9 Buy, 1 Hold, 0 Sell (consensus)
- Target Price Consensus: S\$3.60, representing a 20.7% upside from the current price of S\$2.98.
Conclusion: Embedded Resilience and Upbeat Growth Prospects
SATS Ltd stands out for its ability to grow market share and deliver robust earnings even in the face of global trade uncertainties and sector headwinds. With strategic investments in cargo operations, food solutions, and sustainability initiatives, SATS is well-positioned for continued growth and margin expansion through FY26 and beyond. The company’s strong ESG credentials, prudent capital deployment, and commitment to shareholder value further reinforce its appeal to long-term investors and institutional market participants.
Appendix: Analyst Contacts
- Tay Wee Kuang, T (65) 6210 8604, E weekuang.tay@cgsi.com
- Lim Siew Khee, T (65) 6210 8664, E siewkhee.lim@cgsi.com
