SATS: Navigating Challenges with Strategic Acquisitions and Market Positioning for Long-Term Growth

In a report released today, Wee Kuang Tay from CGS-CIMB reiterated a Buy rating on SATS (SPASF – Research Report), with a price target of S$3.05.

Wee Kuang Tay’s rating is based on a combination of factors that highlight both challenges and opportunities for SATS. Despite the anticipated stall in earnings growth for FY3/26 due to a challenging macroeconomic environment and a projected 10% decline in global air cargo demand, Tay maintains a positive outlook on SATS. This is largely due to the company’s current share price being at an 8-year low in terms of EV/EBITDA, which already reflects its tempered growth prospects.
Furthermore, SATS’s significant exposure to the aviation industry, which constitutes 92% of its revenue, presents both risks and potential benefits. While cargo volumes are expected to decline, travel demand remains relatively strong, benefiting the company’s ground-handling and aviation food businesses. Additionally, SATS’s acquisition of Worldwide Flight Services and its expanding network are expected to support long-term growth and market share gains, positioning the company for improved profitability beyond FY26. The resolution of trade tensions and resilient trade volumes could serve as catalysts for a re-rating, although risks such as a global recession and delayed utilization of new central kitchens remain.