7 Useful Things Investors Should Know About SATs Limited

SATS Ltd  (SGX: S58) is one of the cool companies in Singapore which shares webcasts of their earnings presentations (the link for SATs is here).

The company has two major segments, namely, Food Solutions and Gateway Services. The first covers airline catering, food distribution, industrial catering and other services. Meanwhile, the latter is involved with ground handling services of passengers, flights and cargo.

You can read more about SATS in here and here.

Recently, SATS released its fiscal fourth-quarter earnings for its fiscal year ended 31 March 2015 (FY14/15). Below are seven useful things about the company’s business and its latest financials that I had learned from listening to its earnings conference call:

  1. Given the difficult external environment, Chief Executive Officer Alex Hungate said that SATS’s focus in FY14/15 was to increase its productivity and to reduce costs. The company’s financial results for the year appear to agree with Hungate’s statement; while FY14/15 revenue fell 1.9%from a year ago, SATS’s earnings per share managed to grow by 8.7%.
  2. The number of flight, passengers, and unit services handled by SATS for the whole of FY14/15 fell, mainly driven by the loss of a contract with a low-cost carrier.
  3. Speaking on dividends, Hungate stressed that SATS was focused on keeping its dividends sustainable. He also said that dividend increases may not come every year but the team will attempt to maintain a “pattern of increases.” It’s notable that SATS was able to increase its annual dividend in FY14/15 by 1 cent per share (to 9 cents) compared to a year ago, yet its dividend payout ratio had been kept slightly lower.
  4. Moving on to SATS’s joint venture with BRF GmbH, Hungate commented that the joint venture will be focused on meat distribution and processing and will expand into finished products in the future. SATS also revealed that BRF is the largest poultry exporter in the world and the sixth largest food company in the world (by market value). Hungate felt that the joint venture will add scale for the company’s meat processing business and improve the consistency of its profit margins. At the moment, SATS will be looking to increase volumes to its Pandan Loop processing facility and increase asset turns from it. Ultimately, SATS is looking for the joint venture to be a major pan-Asian branded foods company.
  5. The drop in oil prices improves the profitability for airlines (SATS’s customers). With better profitability, Hungate felt that airlines will be focusing more on yield and subsequently, customer experience. This may benefit SATS. Furthermore, according to Hungate, Singapore Airlines Ltd (SGX: C6L) will also focus on improving its food offerings for its new Premium Economy class.
  6. Hungate also affirmed during the call that SATS is not considering an exit from its Japanese subsidiary, TFK. He did emphasize though that action is needed as the subsidiary’s performance has been disappointing. SATS had focused on reducing the cost base for TFK in the past year and will be looking to improve the top-line in the future as well.
  7. On an amusing note, one participant also gave feedback that her checked bags seem to take longer to come out to the conveyor belt to which a member of SATS’s management team jokingly answered “no lah …”

Foolish takeaway

To buy and hold a company’s shares for the long term also means keeping up with developments in the firm.

The access to management teams via webcasts gives the Foolish investor a fair chance to judge whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.