How can SATS recover its financial performance by 2025?

SATS recorded a net loss of $33m in the third quarter of FY2022. 

Airline food services provider SATS may recover its financial performance by FY 2025, according to a report by UOB Kay Hian.

The company is currently in a net loss position, recording $33m core net loss by the third quarter of FY2022, excluding government support. Near-term performance is expected to remain weighed down by the rising cost pressure from inflation on food ingredients and labour and headcount build-up ahead of business volume recovery.

However, UOB Kay Hian expected the cost pressure to be eventually passed down to end customers as the businesses continue to recover.

Here are three ways SATS can recover its financial performance by FY 2025, according to the report:

• SATS will benefit directly from the air travel recovery in the region with its over 80% share of inflight catering and gateway services at Changi Airport and its strong presence at regional hub airports in several key Asian countries.
• Diversifying into the non-aviation segment (e.g. non-aviation food solutions such as central kitchens). may offer SATS another growth engine while its travel-related businesses remain in recovery mode in the next two to three years.
• SATS will be investing $1b, with up to $800m for mergers and acquisitions. According to management, it will be split between food solutions, gateway services, and a significant portion in overseas operations.

UOB Kay Hian concluded with its aviation business well on track for a recovery, SATS is proactively driving expansion in the non-aviation segment. It is positive on SATS' decision to tap its balance sheet strength and propel growth through investment.