4 Key Insights to Know from SATS Ltd’s Chief Executive

SATS Ltd (SGX: S58) is among the newest components of the Straits Times Index (SGS: ^STI), having joined the list only in September 2015.

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 ground handling services of passengers, flights, and cargo.

Recently, SATS’s chief executive Alex Hungate was featured in an interview series. There might be things investors can learn from Hungate.

Here are four key insights I had picked out from the interview:

1. Rise of the machines  click here

2. Productivity is boosting the bottom line click here

3. SATS’s competitive advantage

Hungate believes that SATS’s strength in food solutions lies in two areas, its scale and know-how:

“Not only do we have the industrialised capability to manufacture fresh, quality food, we also run these centralised kitchens better than anyone else because of our R&D capability – we combine those capital-intensive, large-scale facilities with a very cosmopolitan culinary expertise, developed by the hundreds of chefs we employ, who have different ethnic backgrounds and skills to create authentic tastes.”

This strength has led to new ventures. SATS is partnering Wilmar International Limited (SGX: F34) to build central kitchens in China. But, this venture is still in the early stages and is not expected to be immediately profitable.

4. The eCommerce opportunity

SATS is also looking to eCommerce for growth. Hungate points out:

“Asia is the biggest e-commerce market in the world, and is also the fastest-growing. Last year, the value of e-commerce in this region overtook the value of e-commerce in North America.”

SATS is constructing a new highly automated facility, named SATS eCommerce AirHub, for this purpose. This facility will be anchored by Singapore Post Limited (SGX: S08). Hungate is optimistic on the venture:

“The facility will be able to handle all of our existing volumes, plus volumes from SingPost today, and times four in the future, without employing any more people – that’s a great example of what we mean by operating leverage.”

That could be something worth looking forward to for SATS’s investors.

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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 companies mentioned.