6 Useful Things Investors Should Know About SATS Ltd

SATS Ltd  (SGX: S58) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations and conference calls (the link for SATS is here).

The company has two major business segments, namely, Food Solutions and Gateway Services. The former covers airline catering, food distribution, industrial catering, and other services. Meanwhile the latter sees SATS provide services such as airfreight, baggage, and ramp handling, among others.

You can read more about SATS in here and here.

Catering to shareholder returns

SATS had recently reported its fiscal third-quarter earnings for its financial year ending 31 March 2016 (FY15/16). Below are six useful things I had learned from listening to the conference call for the company’ earnings presentation:

  1. Alex Hungate, SATS’s chief executive, kicked off the meeting with an overview of the quarter’s results. The deconsolidation of SATS’s food distribution business to the SATS-BRF joint venture was a key highlight; this resulted in lower revenue, but higher profits. Without the deconsolidation, SATS’s revenue would have increased by 6.5% year-on-year instead. Hungate did note, however, that there was a slight disappointment from the lower contributions from SATS’s associates and joint ventures.
  2. Operational statistics were up across the board for SATS. For instance, passengers handled rose 13.3% year-on-year for the quarter, gross meals produced was up 4.3%, and cargo processed climbed slightly by 2.7%. Hungate said that the Jetstar contract which SATS regained had accounted for the double-digit increase in passengers handled, flights handled, and unit services handled. Without the Jetstar contract, passengers handled and flights handled would have been up 4.5% and 3.9% respectively, he added. These exceed Changi Airport’s stats, which saw a 3.8% year-on-year increase in passengers handled.
  3. Hungate expressed confidence in the long term growth prospects of SATS. He also gave a few examples where SATS was building into adjacent businesses, like SATS’s joint venture with DFASS, a travel retail outfit. This allows SATS to pursue ground-based travel retail opportunities alongside another joint venture, SATS-Creuers Cruise services, which operates the Marina Bay Cruise Centre Singapore. Hungate also talked about the joint venture between SATS and Yihai Kerry, a wholly owned subsidiary of the Singapore-listed giant palm oil producer Wilmar International Limited  (SGX: F34). This is to supply safe and high quality food into the China market. The joint venture with Wilmar is not expected to produce results until 2017, but Hungate is hopeful that this will be a substantial business in the future.
  4. Hungate also provided more insight into Brahim’s Airlines Catering Holdings, in which SATS had very recently bought a 49% equity stake. SATS buys most of its raw materials from Malaysia, where Brahim is dominant, so Hungate sees an opportunity for cost reduction through combined purchases.
  5. SATS has a presence in 45 airports, across 12 countries. Hungate mused that the joint venture with DFASS will benefit SATS with existing revenue and provides the chance for SATS to learn more about inflight retail. DFASS is a major provider for Singapore Airlines Ltd (SGX: C6L).
  6. As mentioned in a previous article, SATS has a two-decade presence in China, primarily through BAIK and Beijing Aviation Ground services. Hungate gave a teaser on the possibilities between the joint venture with Wilmar and its existing Chinese subsidiaries. He said that SATS will be investing in stages, moving from city to city, and felt that this is a substantial opportunity for the group.

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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.