SATS to reap benefits from Japan's tourism boom

Japan targets to receive 40m inbound visitors by 2020.

SATS is well positioned to be a beneficiary of the tourism boom in Japan, OCBC Investment Research said. 

According to the brokerage firm, Japan targets to receive 40m inbound visitors by 2020. This will give a boost to SATS' Japan airline catering subsidiary, TFK.

"The tourism boom in Japan is not new news – Japan recorded double-digit YoY growth in foreign visitors for the past five years (2012-2016) and for the period Jan-Apr 17, Japan continued to register strong growth of 16.4% YoY to 9.1m foreign visitors," OCBC Investment Research said.

The expected surge in the number of tourists by 2020 could be attributed to the 2020 Summer Olympics, which will be held in Tokyo, Japan.

TFK operates in both Narita and Haneda airports in Tokyo. These two ranked first and third in terms of market share in Japan.

"That said, the intense competition in the airline catering business at these two airports is persistent and is also the key reason for the weak profitability of TFK more than a year back, although it recorded improvement in FY17 after securing Delta Airlines’ multi-year contract that commenced in 3QFY16," the brokerage firm said.