SATS to reap benefits from gateway services

The segment revenue growth may rise to 5.9%.

As global cargo volumes continue to rise by by high-single to double-digit growth, SATS' gateway services is expected to benefit from this ongoing phenomenon.

According to UOB Kay Hian analyst K Ajith, air cargo volumes have risen globally over the past four months, with much of the growth being driven by outbound Asia-Pacific air cargoes to Europe and North America.

The analyst said SATS’ gateway services revenue is highly correlated with cargo volume handled as well as flights handled.

"Hence, we raise our gateway services revenue growth estimate from 4.6% to 5.9%, excluding the deconsolidation impact from SATS HK," Ajith noted, pointing out that the latter is expected to be deconsolidated by mid-FY2018.

To recall, gateway services segment accounted for 43% of total revenue for FY17.

"Any increase in volume will have a greater impact on operating margins as SATS is increasingly automating its gateway operations," the analyst said.