8 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.

There may be useful and important information that investors can learn from the webcasts and transcripts. A week ago, SATS had released its results for the quarter and fiscal year ended 31 March 2016 (FY15/16). I had spent time listening to the webcast of its earnings conference call and came away with eight things that may be important for investors to note.

But before I share them, here’s a brief introduction of SATS for some context later. 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 is involved in ground handling services for passengers, flights, and cargo.

You can find out more about SATS in here and here.

With that, here are my notes:

  1. Alex Hungate, SATS’s chief executive, kicked off the call with an overview of SATS’s medium to long-term outlook. SATS’s purpose is feeding and connecting Asia. He felt that SATS is very good at one thing: Running large scale centralized kitchens. On connecting Asia, Hungate said that SATS has a network advantage as it is located in 45 airports in 12 countries. He added that none of its competitors have that kind of network.
  2. Cho Wee Peng, SATS’s chief financial officer, took over the reins next. He shared that operational statistics for SATS was up across the board. Passengers handled rose over 21% year-on-year for the quarter, while gross meals produced was up by 5.6%. Cargo processed was also up 4.8% year-on-year.
  3. Cho also highlighted a few financial figures for FY15/16. SATS’s underlying net margin was 12.8% for the fiscal year, up from 11.2% a year ago. Meanwhile, SATS ended the fiscal year with almost $490 million in cash and equivalents on its balance sheet. In addition, Cho pointed out the improvements in SATS’s business in Japan, where revenue grew over 19% to almost $60 million.
  4. For FY15/16, SAT’s associates and joint ventures contributed $48 million in after-tax profit. The major contributors were Air India SATS (AISAT), Asia Hong Kong’s Asia Airfreight Terminal (AAT), Maldives Inflight Catering (MIC) and PT Jasa Angkasa Semesta (PT JAS). The quintet accounted for over 75% of the $48 million.
  5. Hungate also talked about SATS’s opportunities in Asia. SATS had increased its stake in MacroAsia Catering services (Philippines) from 20% to 33%. Meanwhile, SATS had also acquired a 49% equity stake in Brahim’s Airlines Catering Holdings in Malaysia. Hungate said that the airline restructuring opened an opportunity for SATS to be involved in the Malaysian market. Elsewhere, SATS also signed a joint venture agreement with Oman Air, Oman’s national airline, to take up a one-third equity stake. This is also the first time SATS is venturing into the Middle East.
  6. Finally, Hungate talked about three adjacent businesses. The SATS-BRF joint venture had been operational since June 2015. He said that BRF is the largest exporter of protein out of Brazil and provides scale to the joint venture. The SATS-BRF joint venture is the largest importer of protein into Singapore.
  7. Next up, Hungate talked about the joint-venture between SATS and Yihai Kerry, a wholly owned subsidiary of Wilmar International Limited  (SGX: F34). This is to supply safe and high quality food into the China market..
  8. Last but not least is SATS’s joint venture with DFASS, a travel retail outfit. Hungate said that the joint venture has already won three large contracts with Singapore Airlines Ltd  (SGX: C6L), Scoot, and SilkAir.

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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.