2QFY23 (Jul to Sep 2022) revenue came in at S$429m (+14%), suggesting that SATS (SGX:S58) is benefitting from the reopening of borders. Food solutions revenue rose 13% q-o-q to S$186m while gateway revenue rose 40% q-o-q to S$189m (including the consolidationf of AAT). Flights and passengers handled in 2Q were at 62%/56% of pre-COVID-19 levels of 1HFY20.
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Raw materials costs declined to 37.8% of food solutions revenue in 2QFY23, vs above 40% in the past quarters, on the back of better operating leverage.
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Excluding grant (S$9.8m) and M&A expenses (~S$15m), SATS's 2QFY23 net loss would have been at ~S$6m, closer to break-even.
There will still be more M&A expenses to be incurred in 2HFY23F (quantum undisclosed), but we project a profitable 2HFY23F as management expects Changi aviation volume to reach 80% by end-FY23.
SATS shared that the optimal funding structure to fund its acquisition of Worldwide Flight Services (WFS) would likely be a rights issue for ~S$800m, ~S$700m from 3-5-year term loans, and ~S$300m cash. As at end-Sep, SATS's cash balance stood at S$689m, net cash at S$174m.
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Above is the excerpt from research report by CGS-CIMB. Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
