SATS "Steady Growth Amid Headwinds" (Buy) Leong

Research evidence excerpt

SATS "Steady Growth Amid Headwinds" (Buy) Leong

luted) (S$)

Using UBS Evidence Lab's cargo payload (after adjusting for IATA's CLF and SATS

From To % ch Cons.

geographical exposure) and commercial airline traffic datasets as read-throughs, we 03/27E 0.20 0.21 4 0.22

estimate overall cargo volumes to increase 1.6% YoY in 1QFY27E, with growth in APAC 03/28E 0.22 0.25 15 0.25

(+4%) and the Americas (+6%) helping offset potential weakness in EMEA (-3%) arising 03/29E 0.26 0.29 11 0.28

from Middle East airspace disruptions. This translates to 3.7% YoY expansion in revenue

to S$809m, assuming conservative 2% YoY increase in rates. For FY27E, we forecast Melissa Leong

overall 5.3% gain in cargo revenue to S$3,441m. Analyst

melissa.leong@ubs.com

+65-6495 6773

Food: Lower meal rates offset by cheaper production and higher volumes

Rachael TanWe remain positive on food solutions segment. Although the transition from chilled

Analyst

fresh to fresh frozen meals may result in some pricing pressure as customers negotiate rachael.tan@ubs.com

for lower rates (fresh frozen meals are cheaper to produce), this will be offset by higher +65 6495 7951

production volumes and lower cost manufacturing base from Thailand central kitchen.

We forecast 9.7% YoY improvement in FY27E food solutions revenue to S$1,526m.

Valuation: 10% WACC DCF derives S$5.17 PT, 25x implied PE (Buy)

Our higher PT includes resilient cargo volumes against macro headwind and Thailand

central kitchen volumes. Furthermore, despite the stock's 41% share-price appreciation

over the LTM, market-implied CFROI has only increased modestly from 3.1% to 3.7%,

below freight-forwarding peers more exposed to rerouting and freight rates.

Highlights (S$m) 03/24 03/25 03/26 03/27E 03/28E 03/29E 03/30E 03/31E