SATS Ltd. Financial Analysis – 214% Net Profit Growth in 2Q FY25

Business Description

SATS Ltd. is headquartered in Singapore and is one of the world’s largest providers of air cargo handling services and Asia’s leading airline caterer. The company’s operations are divided into two main segments:

• Gateway Services: Provides airfreight and ground handling services including passenger services, ramp and baggage handling, aviation security services, aircraft cleaning, and aviation laundry.
• Food Solutions: Serves airlines and institutions, operating central kitchens with large-scale food production and distribution capabilities for a wide range of cuisines.

SATS operates in the Asia-Pacific, the Americas, Europe, the Middle East, and Africa, with a network covering over 215 stations in 27 countries following the acquisition of Worldwide Flight Services (WFS) in 2023.

Industry Position

SATS is a leading global provider of aviation solutions, leveraging its capabilities and network to maintain a competitive advantage in an evolving marketplace. It faces competition from other global and regional air cargo handling and catering service providers.

Revenue Streams and Customer Base

The company’s revenue streams are primarily derived from Gateway Services and Food Solutions. The customer base includes airlines, e-commerce companies, and institutions requiring large-scale food production. SATS’ competitive advantage lies in its extensive network, operational efficiency, and strategic partnerships.

Financial Statement Analysis

Income Statement

For 2Q FY25, SATS reported:

• Revenue: S\$1.45 billion, a 14.1% increase YoY.
• EBITDA: S\$265.7 million, a 37.8% increase YoY.
• PATMI: S\$69.7 million, a 214% increase YoY.

For 1H FY25, SATS reported:

• Revenue: S\$2.82 billion, a 14.8% increase YoY.
• EBITDA: S\$514.8 million, a 48.0% increase YoY.
• PATMI: S\$134.7 million, a significant improvement from a loss of S\$7.8 million in 1H FY24.

Balance Sheet

As of 30 September 2024, SATS reported:

• Total Equity: S\$2.69 billion, an increase of S\$127.6 million from 31 March 2024.
• Total Assets: S\$8.27 billion, a decrease from S\$8.48 billion as of 31 March 2024.
• Total Liabilities: S\$5.58 billion, a decrease of S\$337.2 million due to debt repayment and lower lease liabilities.

Cash Flow Statement

For 1H FY25:

• Operating Cash Flow: S\$208.9 million, compared to S\$75.5 million in 1H FY24.
• Free Cash Flow: Negative S\$69.3 million, reflecting an improvement of S\$142.1 million YoY.

Dividend

SATS declared an interim dividend of 1.5 cents (S\$) per share, payable on 6 December 2024, with the book closure date on 22 November 2024 [[5]].

Key Findings and Recommendations

Strengths

• Significant increase in PATMI by 214% YoY for 2Q FY25.
• Revenue growth driven by increased air cargo volumes and demand for inflight meals.
• Improved operating profit margins and EBITDA margins.

Risks

• Unrealised foreign exchange losses impacting expenditure.
• Geopolitical issues, such as the Red Sea crisis, affecting supply chain dynamics.

Recommendations

For Current Investors: Considering the impressive net profit growth and positive outlook, it is recommended to hold the stock to benefit from future gains.

For Potential Investors: The company’s strong performance and strategic positioning make it a compelling buy for those not currently holding the stock.

Special Activities

The company is focused on leveraging its global network and expanded scale to improve operational efficiency and introduce new product offerings, further solidifying its global leadership position [[5]].

Report Date

The report is dated 7 November 2024 and covers the financial results for the six months ended 30 September 2024 (1H FY25) [[1]].

Disclaimer

Please note that this analysis is for informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence before making any investment decisions.