Sats unlikely to resume dividend payout ratio of 70-80%, but quantum will rise in tandem with profit

 

The group aims for over S$8 billion in revenue, return on equity of higher than 15%, and net profit margin of over 5% in FY2029

 

IN-FLIGHT caterer and ground handler Sats : S58 -3.27% is unlikely to return to paying out 70 to 80 per cent of its earnings, although the quantum of dividend per share will rise in tandem with its profit.

 

Manfred Seah, chief financial officer of Sats, pointed this out at a financial results briefing on Friday (Nov 8), a day after it posted a trebling of its second-quarter net profit from S$22.2 million to S$69.7 million, which slightly beat consensus estimates.

 

It has declared an interim dividend of S$0.015 per share against an earnings per share of S$0.09 for the first half of FY2025 to September, translating to a payout ratio of 16.7 per cent.

 

The complexion of the listed group&rsquo s business has changed, Seah noted, as he explained Sats&rsquo capital management plans.

 

&ldquo We don&rsquo t have a fixed percentage of payout, but what we are guiding is the dividend amount per share will actually increase in tandem with the increase in profitability, simply because we do have requirements for repayment of debt. Our debt load is still a little bit high,&rdquo he said.

 

Debt was slightly under the S$4 billion mark as at end-September, comprising S$2.6 billion of borrowings and S$1.3 billion of lease liabilities.

 

The group also needs the cash to reinvest in capital expenditure for sustainable growth, said Seah.

 

Meanwhile, Kerry Mok, chief executive officer of Sats, is confident that his group will be able to tackle any changes in the air cargo supply chain under the Trump administration, following Donald Trump&rsquo s triumph in the US presidential election.

 

&ldquo I think when you look at the business that we have, we&rsquo re not tied to any particular region, and one of the strategies we have in place is to expand our network so that no matter how the cargo supply chain changes, we are in the best position to continue to grow,&rdquo the helmsman said at the financial results briefing.

 

Also, Sats operates in key hubs and works with partners for multi-modal operations, Mok pointed out. &ldquo Multi-modal is becoming a product that is gaining traction as well.&rdquo

 

Sats&rsquo revenue amounted to S$1.5 billion, up 14.1 per cent year on year, for the quarter.

 

The group has set targets of achieving over S$8 billion in revenue, a return on equity (ROE) of higher than 15 per cent and a net profit margin of over 5 per cent in FY2029, according to the presentation deck for its Capital Markets Day on Friday.

 

For FY2024, Sats reported a top line of S$5.1 billion, a return on equity of 2.4 per cent and a net profit margin of 1.1 per cent.

 

Sats is looking at improving its top line, controlling costs and undertaking non-transformational mergers and acquisitions to add stations to its network to achieve its FY2029 targets, said CFO Seah.

 

Its gateway services segment, which provides airfreight and ground-handling services, is expected to contribute to 75 per cent of the revenue goal. The food-solutions segment, which serves airlines and other institutions, accounts for the remaining 25 per cent.

The group also reports a half-year profit of S$134.7 million, reversing from the red

 

IN-FLIGHT caterer and ground handler Sats : S58 -0.75% on Thursday (Nov 7) announced a second-quarter profit of S$69.7 million for its 2025 financial year, soaring 214 per cent from S$22.2 million in the corresponding year-ago period.

 

Revenue for the three months ended Sep 30 increased 14.1 per cent to S$1.5 billion, from S$1.3 billion year on year.

 

The group declared an interim dividend of S$0.015 per share, payable on Dec 6.

 

It did not propose any dividends in the corresponding year-ago period.

 

The quarter&rsquo s on-year gains were due to business volume growth, rate increases and a three-month revenue catch-up recorded in Q2 FY2025 upon the finalisation of a contract renewal, said Sats.

 

Its gateway services revenue gained 10.3 per cent on-year to S$1.1 billion, as cargo market growth was supported by greater e-commerce demand and sea freight disruptions due to the Red Sea crisis.

 

Food solutions revenue, meanwhile, rose 28 per cent year on year to S$352.8 million, due to higher demand for in-flight meals as travel recovered.

 

Sats&rsquo expenditure excluding depreciation and amortisation grew 9.9 per cent to S$1.2 billion year on year, in tandem with increased business volume.

 

The expenditure for Q2 FY2025 also included an unrealised foreign exchange loss of S$21.6 million, mainly due to the translation of US dollar and euro intercompany loan balances at the end of the quarter.

 

Despite this, however, the group&rsquo s operating profit doubled to S$127.2 million, from S$64.1 million in Q2 FY2024.

 

Its operating profit margin improved to 8.8 per cent from 5 per cent, as revenue growth outpaced higher expenditure.

 

For the first half of FY2025, the group returned to the black with a profit of S$134.7 million, compared to a loss of S$7.8 million in the year-ago period.

 

This translates to an earnings per share of S$0.09 for the six months, compared to a loss per share of S$0.005 previously.

 

H1 revenue was S$2.8 billion, up 14.8 per cent from S$2.5 billion year on year. The improvement was attributed to the scale leverage derived from a higher business volume, as well as rate increases from customers.

 

The group expects the positive momentum to continue into the next quarter as demand for travel and cargo reaches its seasonal year-end peak.

 

Kerry Mok, Sats president and chief executive, said that the group had signed new strategic partnerships in Q2 to maintain its competitive advantage, as well as restructured its gateway services business in the Asia-Pacific. He added: &ldquo We are pleased with the progress of our integration and the sustained improvements in operating results. This quarter&rsquo s good performance is further proof that our strategy is delivering.&rdquo

 

 

The counter jumps 9.1 per cent or S$0.34 to S$4.08

 

SHARES of in-flight caterer and ground handler Sats : S58 +7.22% advanced amid a steady surge in trading volumes in the morning trading session on Friday (Oct 25).

 

As at 9.33 am, the counter had jumped 9.1 per cent or S$0.34 to S$4.08, with some 8.1 million shares having changed hands. The last time its share price traded at such levels was in September 2022.

 

Sats was the most actively traded company in terms of value on Friday morning. Its shares were also heavily traded in terms of volume. By 10.45 am, some 14.1 million shares worth S$55.9 million were being transacted. The counter was up 6.7 per cent or S$0.25 at S$3.99 at that time.

 

No married deals were recorded in early trade, ShareInvestor data indicated.

 

In September, Sats said it will work with Chinese logistics company Sinotrans Air Freight (Sinoair) on ground and cargo-handling services across their respective networks.

 

The two companies are also said to be in talks for Sats to manage Sinoair&rsquo s new Hangzhou e-commerce hub, slated to be ready in 2026.

 

The tie-up will also extend across their respective networks and include setting up gateway hubs for Sinoair in Singapore, Malaysia, Indonesia, Saudi Arabia and Belgium.

 

Sats&rsquo collaboration with Sinoair came a month after its subsidiary, Worldwide Flight Services Holland, proposed to acquire Menzies World Cargo (Amsterdam), which is the general cargo handler at the Netherlands&rsquo main international airport.

 

The proposed acquisition will increase the warehouse capacity and cargo handling capabilities for Worldwide Flight Services Holland in one of Europe&rsquo s busiest air cargo locations, said Sats.

 

The additional warehouse will provide more capacity for Worldwide Flight Services Holland, which will enable it to capitalise on its strong local customer relations and service levels, and position itself for growth over the long term, added the company.