SATS – The Busy Bees Behind Asian Inflight Comfort

Sats40SATS Ltd. (S58.SI) is Asia’s largest gateway services and aviation food solutions network. The company operates at 43 airports in 11 countries across Asia Pacific and the Middle East as well as through joint ventures in China, Hong Kong, Macau, India, the Philippines, Indonesia, Taiwan, Vietnam and the Maldives. The group controls about 80% of Changi airport’s ground handling and catering business.

SATS’ food solutions business comprises airline catering, food distribution, industrial catering, and other services while the gateway services are involved in ground handling services for passengers, flights, and cargo.

A new acquired 49% stake in Brahim’s Airline Catering Holdings Sdn Bhd will get SATS into Malaysia’s leading in-flight catering and cabin handling service at both KL International Airport and Penang International Airport.

SATS business is capitalizing from the long-term growth prospects of the airline traffic. According to Boing’s market outlook, Asia-Pacific air traffic is forecasted to climb at an annual rate of 6.3% until 2033. That rate of growth leads to more than a doubling of air traffic flow by 2033.

SATS generates with a staff of over 14 thousand and a revenue 1,8bn SGD a profit of 225m SGD. Though the fundamentals of the company and a dividend yield of just 3.6% do not make us too enthusiastic, the stock gained remarkable 27% this year (STI -15.4%). The company convinced through growth into adjacent businesses and geographies as well as through successful cost management and productivity improvements through new technologies and economies of scale. Seven out of thirteen covering analysts recommend the stock to buy with a price target of up to 4.60 SGD. With a P/E of 21 SATS is not a cheap bet. We see some potential only with a break of the resistance line at 4 SGD.

AIS Rating: ★★★☆☆

 

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EPS 17.3 15.4 16.5 16 17.4 20.1
Change 4% -11% 7% -3% 9% 16%
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21
10