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Singapore’s Big Winner for the Week: SATS Ltd

This week, the title of “Singapore’s Big Winner” goes to SATS Ltd  (SGX: S58). Shares of the firm made a weekly gain of 4.6% to end at S$3.85 yesterday. In comparison, the Straits Times Index  (SGX: ^STI), Singapore’s market barometer, was nearly unchanged during the same time period, having stepped down by just 0.02%.

On Thursday, SATS, which is a provider of gateway services and food solutions for the airline industry in the region, released its financial results for its fiscal first-quarter ended 30 June 2015. Currently, the company has operations in 43 airports and 11 countries across Asia and the Middle East.

Revenue for the reporting quarter dipped 4.2% year-on-year to S$416.9 million. This was on the back of a reduction in sales from the food solutions business which was partially offset by an increase in gateway services revenue.

However, lower cost of raw materials and lower staff expenditures helped engineer a 10.8% year-on-year improvement in SATS’ operating profit. Consequently, net profit went up by 14.5% from S$43.3 million a year ago to S$49.6 million in the reporting quarter.

If we look at SATS’s balance sheet, we can see the firm having a net cash position (meaning to say cash exceeds borrowings) of S$366.6 million as of 30 June 2015. This is an improvement from the selfsame figure of S$305.6 million seen three months ago.

Free cash flow for the quarter ended 30 June 2015 was at S$21 million whereas a year ago, the figure was at S$31 million. Part of the reason for the dip was a huge year-on-year increase in accounts receivables. Despite the decline in revenue for the quarter, SATS’s receivables grew; this may be a yellow flag for potential trouble ahead and investors  should keep a keen eye on the situation to see if there’s any improvement in the coming quarters.

Going forward, SATS said that it will continue with its “strategy of driving productivity through scale and connectivity, and launching new ventures that will support our future growth.” This is despite the company facing issues such as keen competition in the airline industry and low growth in air traffic over the short term.

The firm is now trading at 22 times its historical earnings.

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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 Sudhan P doesn’t own shares in any companies mentioned.