SATS - Phillip Securities 2025-05-26: Fading E-commerce Tailwinds From China To The US

• SATS's FY25 PATMI surged 332% y-o-y to S$243.8mil, in line with our expectations at 96% of our FY25e forecast. The strong growth was driven by broad-based performance, supported by a 15.1% y-o-y increase in air cargo volume and a 21.2% y-o-y rise in aviation meals.
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• Although China and the US have agreed to reduce bilateral tariffs, uncertainty remains for the air cargo segment. Particularly, e-commerce from China to the US, which accounted for 5% of the Group’s revenue in FY25, following the cancellation of the De Minimis Exemption.
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The Positives

Cargo demand is supporting the growth.

• Gateway services revenue rose 11% y-o-y to S$4.5bn, primarily driven by a 15.1% increase in air cargo tonnage. Although 4Q is typically seasonally weaker in the post-festive period, front-loading activities supported profitability, with air cargo volume improving 11% y-o-y. We expect the front-loading momentum to continue into 1QFY26.
• While order cancellations from Chinese e-commerce players, following the removal of the De Minimis Exemption, have occurred, demand has been backfilled by rising demand of automotive parts. However, we are penciling in a 3% y-o-y decline in FY26e gateway services revenue, as front-loading is expected to taper off from 2QFY26 onwards, with companies likely adopting a wait-and-see approach to inventory restocking.

Margin improvements are on track.

• Read more at SGinvestors.io.

Liu Miao Miao Phillip Securities Research | https://www.poems.com.sg/ 2025-05-26

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