20 Jan 2020
(Stocks Discussion) SGX: SATS Ltd (SGX: S58)?
Discuss anything about SATS Ltd SGX: S58 share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment in SATS Ltd SGX: S58?
SATS is a healthy company with good profitability and give out a consistent dividend.
However, their growth has slowed for the past few years.
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Business Profile: The first time I really got to know SATS was through lunch at the cookhouse during my NS days. Although SATS is known for their NS meals, they also provide food solutions to airlines, other government agencies, logistics companies but also have segments in gateway services, aviation security, aviation laundry and even a cruise centre.
Financials: For their 3Q FY18/19, revenue had grown by 5.5% YOY to 464m. Operating profit had decreased slightly by 0.6% to S$65.3 million from higher expenditures, but associates and joint venture's profit after tax had increased considerably by almost 2%. Net profit attributable to shareholders thus had an increase by almost 4%. This led to an increase in PBT and overall net profit. Overall free cashflow had also increased due to higher operating cashflow generated by improved working capital conditions.
Valuation: As of today, SATS has a share price of $5.17 with a P/E ratio of 22.25. As compared to the SPDR STI ETF ratio of 11.5, SATS valuation seems rather high. The shares also seem overvalued compared to the Asian infrastructure industry average. Based on a PEG ratio of 3.2X, Simply WallStreet has also concluded that the shares seems overvalued based on forward growth rates. The current P/B ratio of more than 3X also seems to suggest overvaluation as compared to Asia infrastructure market.
Risks: The large proportion of SATS revenue belongs to aviation related activities, so a downturn in the aviation sector could result in SATS being heavily affected due to this concentration risk. Increase in operating expenditures from wages, raw materials can reduce margins considerably. With FX risk, SATS also has 14% of their revenue from Japan, and the changes in currency over the past years had led to changing revenues.
Growth Profile: Overall, it seems that SATS has quite a few growth opportunities availible. Such of these drivers include passenger and air traffic growth at Changi Terminal 4, the opening of Terminal 5 by 2030 and more positive outlook from TFK Japan. There has also been increase in demand for convenient food within this region as well as increased operations in China which can drive en more growth.
I think that Isaac has already provided an invaluable opinion and analysis on SATS currently, that t...
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