SATS - CGSI Research 2024-02-29: Operating Leverage Flowing Through

• SATS (SGX:S58) saw 3QFY24 revenue grow 6.5% q-o-q, with gateway services/food solutions revenue up 6.5%/6.8% q-o-q.

A broad-based revenue growth in 3QFY24

• Within its gateway services segment, cargo revenue rose 7.7% q-o-q to S$668.8m, following a 7.9% q-o-q increase in cargo tonnage handled, while ground handling services chalked up 4.4% q-o-q growth.
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• Share of associates and JVs reached a record high of S$34.6m, up 49.8% q-o-q, in 3QFY24.

Operating leverage improving, albeit at a gradual pace

• Core PATMI up 89.3% q-o-q to S$31.8m in 3QFY24 on better operating leverage as revenue/share of associates and JVs grew 6.5%/49.8% q-o-q.
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• Nevertheless, we think its OOE should normalise from 4QFY24F, as some FX gains had been recognised in 1HFY24.
• We note that its staff costs had also increased, by 4.3% q-o-q in 3QFY24, which management attributed to wage inflation, as well as higher temporary staffing requirements to cope with increased business volumes in 3QFY24.

New contract wins, strategic collaboration to drive growth ahead

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TAY Wee Kuang CGS International Research | LIM Siew Khee CGSI Research | https://itrade.cgsi.com.sg 2024-02-29 SGinvestors.io

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