The brokerage has set a target price of S$4.52 for the in-flight caterer and ground handler

 

[SINGAPORE] Maybank has initiated a &ldquo buy&rdquo on   Sats   : S58 -0.28% and set its target price at S$4.52 &ndash even as the Middle East conflict causes travel disruptions and US tariffs weigh on its gateway services in the American market. 

 

The in-flight caterer and ground handler is positioned to capture the rise in cargo volume from countries other than China to the US, following US rules that have disrupted online shopping deliveries, said Maybank in a note on Saturday (Mar 14).

 

The target price represents a 25 per cent upside to Sats&rsquo closing price of S$3.61 on Friday. The counter fell 0.3 per cent or S$0.01 to S$3.60 on Monday.

 

Maybank analysts Liu Miaomiao and Eric Ong noted that Sats&rsquo &ldquo strong market presence&rdquo in Asean as well as the Europe, Middle East and Africa regions will keep its &ldquo key growth drivers intact&rdquo amid disruptions caused by US tariffs and geopolitical tensions. 

 

The analysts expect earnings growth of 12.9 per cent for Sats in the 2026 financial year, in view of its &ldquo global presence and dominant position in both gateway services and food catering&rdquo . 

 

Sats&rsquo earnings momentum &ldquo stayed strong&rdquo in its third quarter ended Dec 31, 2025, Maybank noted, with the cargo handler&rsquo s net profit rising 20.4 per cent to S$84.7 million, fuelled by operating leverage and margin expansion.

 

For the first nine months of FY2026, revenue rose 8.7 per cent year on year to S$4.72 billion. This, Maybank noted, was driven by gateway services, which grew 10.6 per cent year on year on the back of &ldquo strong cargo momentum&rdquo . 

 

While weakening air travel demand and rising operating costs may follow heightened geopolitical tensions, Maybank noted that &ldquo mid-term volatility should remain manageable&rdquo given Sats&rsquo &ldquo low single-digit exposure&rdquo to the Middle East.

 

The company&rsquo s &ldquo strong presence in Saudi Arabia and Oman&rdquo , where medium-term traffic diversions occur, could also capture incremental volumes.

 

With Singapore accounting for around 35 per cent of Sats&rsquo revenue, the company &ldquo could benefit from airlines rerouting traffic through South-east Asia&rdquo , Maybank added. 

 

Weaker cargo demand, competition, rising costs

Still, the brokerage noted that Sats may face &ldquo weaker-than-expected air travel and cargo demand amid geopolitical tensions, trade disruptions or a sharper global economic slowdown&rdquo .

 

Competition from global ground-handling and cargo service providers may also exert pressure on pricing and Sats&rsquo profit margins. 

 

Rising operational costs, such as labour, energy and logistics expenses, meanwhile, could weigh on operating margins.

 

Expansions and food solution upgrades

Sats&rsquo &ldquo post-merger synergies&rdquo were realised sooner than expected in the form of productivity gains, cost efficiencies and earnings upgrades, Maybank noted.

 

Earnings before interest and taxes margins are forecast to expand by 8.6 per cent, fuelled by higher throughput and productivity gains from automation and digitalisation across Sats&rsquo global network. 

 

The analysts further noted that Sats&rsquo Thailand central kitchen reached full operational capacity, providing &ldquo a scalable base to serve both regional and cross-border demand&rdquo that can support operations in Singapore and China. 

 

While Sats is expanding capacity by up to five times, serving about 108,000 meals per day, results may be delayed, Maybank said. &ldquo Initial utilisation is likely to be below 50 per cent, and management is actively onboarding customers to ramp up volumes.&rdquo

 

Sats&rsquo earnings mix is expected to &ldquo increasingly tilt towards food solutions&rdquo from FY2026, supported by &ldquo structural shifts in airline catering preferences... for &lsquo fresh frozen meals&rsquo , where food is rapidly frozen at peak freshness to preserve quality&rdquo .

 

&ldquo Should this trend gain broader adoption across airlines, Sats is well positioned to capitalise given its early investments and operational readiness,&rdquo said the analysts.