SATS - CGS-CIMB Research 2022-06-01: Recovery Affected By Near-Term Cost Drag

SATS - Recovery Affected By Near-Term Cost Drag

SATS LTD. (SGX:S58) | SGinvestors.ioSATS LTD. (SGX:S58)
  • SATS (SGX:S58)'s 4Q22 core net loss of S$26.8m was driven by operating loss of S$37.1m as the huge step-up in operating expenses by 31.5% y-o-y to S$336.6m outpaced the modest revenue growth of 7.5% y-o-y as it raked in revenue of S$299.5m for the quarter. Higher operating expenses was driven by:
    1. higher staff cost due to increased headcount and w age inflation, as well as
    2. inflationary pressures resulting in higher prices for raw materials, utilities and fuel.
  • Cost pressures were further compounded by lower government relief of S$18.4m in 4Q22 compared to S$51.2m a year ago. However, we feel that the pre-emptive increase in headcount is essential for SATS due to the lead time required for training given that passenger traffic in Singapore Changi airport returned to ~40-50% of pre-pandemic levels as of May after Singapore drastically relaxed its border measures in April.
  • SATS's healthy cash position of S$786.0m with net cash of S$275m as of FY22 will also allow SATS to follow through with its S$1bn capex and new investment target aimed at grow ing the company‚Äôs revenue to S$3bn by FY25F that was guided in its capital markets day back in November 2021.
  • We revise our FY23/24F earnings forecast for SATS downwards by 21.3%/11.1% on cost pressures but our DCF-based target price is higher on SATS turning profitable in FY23F on the back of recovery within the aviation sector, for which we estimate traffic to return to ~70% of pre-pandemic levels by CY22.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

TAY Wee Kuang CGS-CIMB Research | 2022-06-01
SGX Stock Analyst Report ADD MAINTAIN ADD 4.88 UP 4.770

Read also CGS-CIMB's most recent report:
2022-07-25 SATS - Recovery Intact; But Costs Hurt For Now

Target prices by 3 other brokers at SATS Target Prices.
Listing of broker reports at SATS Analyst Report.

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