SATS - OCBC Investment 2024-02-29: Start Of The Runway

• SATS (SGX:S58) reported a 6.5% increase in revenue q-o-q to S$1.4b on the back of strong seasonal demand. Growth was broad-based, with revenue from the Foods Solutions and Gateway Services segments expanding by 6.8% and 6.4% q-o-q to S$294.5m and S$1.1b, respectively.

Sequential improvement in 3QFY24 results

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• SATS also enjoyed a 49.8% q-o-q increase in contributions from associates and joint ventures to S$34.6m, in line with a stronger recovery in travel.
• All in all, 3QFY24 PATMI rose 41.9% q-o-q to S$31.5m. On a 9MFY24 basis, SATS's revenue and EBIT of S$3.8b and S$161.5m constituted 73% and 70.5% of our initial forecasts, respectively.

Recovery in operating metrics well underway

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• During the quarter, flights handled and gross meals produced slipped 1.4% and 3.6% q-o-q, but passengers handled and cargo processed improved 3.6% and 7.9% q-o-q, respectively.
• On a 9MFY24 basis, passengers handled and gross meals produced were firmly up 58.6% and 44.6% y-o-y, respectively. Stripping out the impact of WFS, flights handled and cargo processed by SATS improved 37.3% and 1.7%, respectively.
• Management is optimistic that SATS will continue to benefit from the ongoing recovery in both passenger and cargo in 2024, and shared that Red Sea tensions may translate to volume growth in Europe and Asia come 4QFY24.

Revised fair value estimate of S$3.09

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Ada Lim OCBC Investment Research | https://www.iocbc.com/ 2024-02-29 SGinvestors.io

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