SATS - CGS-CIMB Research 2023-11-13: Focus On Cashflow After P&L Turnaround 

• SATS (SGX:S58) recorded a core PATMI of S$16.8m for 2QFY24 (Jul to Sep 2023) on better operating leverage q-o-q, as revenue grew 7.0% q-o-q, outpacing opex growth of 4.5% q-o-q.

Strong turnaround to profitability in 2QFY24

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• Although staff costs had grown 4.8% q-o-q, we note that staff count had declined marginally by 0.7% q-o-q, suggesting that SATS has reached an optimal level of staffing.
• Contributions from its share of associates and joint ventures (SoAJVs) also improved 8.5% q-o-q to S$23.1m in 2QFY24, as countries such as China and Japan, where SATS serves the aviation catering market, continues to recover.

Recovery in food solutions to drive near-term growth

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• We think the continued recovery in the aviation industry would drive meals served on flights for SATS, resulting in the segment’s EBIT margins reverting towards FY18-20’s average of 14.7% by FY25F.

Keep an eye on cash management

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TAY Wee Kuang CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2023-11-13 SGinvestors.io

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