SATS narrows losses amidst strong cargo demand boost

The company recorded a 54% YoY revenue fall to $251m.

SATS’ revenue for Q3 FY 2021 fell 54% YoY to $251m, whilst its profit after tax and minority interests (PATMI) loss narrowed to $2.8m in the same period due to an uptick in air cargo volumes, government relief, and improved contribution from overseas entities.

This result came within the expectations of OCBC Investment Research (OIR) as cargo remained the bright spot amidst a muted travel demand. Its management shared that SATS has handled inbound and transhipment of COVID-19 vaccine shipments across Asia.

OIR analyst Chu Peng believes that with the rollout of vaccines, SATS is poised to benefit from the vaccine shipment and the gradual recovery of travel demand.

“As it may take time for global rollout of vaccines and opening of international borders, we believe that SATS may have to rely on its non-aviation segment and cargo services to support its revenue growth in the near to mid-term,” Chu mentioned.

OCBC rated SATS a "buy" and increased its fair value from $4.31 to $4.95.

Meanwhile, CGS-CIMB analyst Lim Siew Khee said associates’ contribution was a "positive surprise" as SATS posted a $3.5m profit after three consecutive losses due to strength in cargo and aggressive cost control. This is in contrast to the analyst’s expected loss of $10m.

Lim added that SATS’ net cash of $122m will back its mergers and acquisitions to build upon the central kitchen trend in China and India, as well as in air cargo, especially in the handling of perishable products and e-commerce in larger airports and major hubs.

She has reiterated an "add" recommendation and a $4.30 target price for SATS.