2 factors that boosted SATS' 37% jump in net income

Staff costs were adjusted.

According to Nomura, SATS reported 4Q13 adjusted net income of SGD60mn, up 37% y-y and 25% q-q. FY13 adjusted earnings at SGD201mn, up 17% y-y, was ~5% above our and ~7% above consensus full-year estimates.

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The beat was driven by a) an unexpected drop q-q in staff costs, as management made adjustment to bonus provisions, which is typically done in 4Q; and b) strong improvement in associates/JV’s contribution from North Asia and SEA/Australasia.

Cargo volumes improved 2% y-y in 4Q13, but we note that this does not signal a cargo recovery, but merely SATS gaining market share, as total cargo traffic at Changi airport was down 2% in the quarter.

TFK operations were down sequentially, which was partly due to JPY depreciation, but still profitable at 4Q EBIT of SGD2mn. Among the positives, contract momentum remains strong, with SATS venturing into a new area—with the award of the Singapore Sports Hub catering contract.