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What Is SATS’s Crown Jewel?

Sats Ltd (SGX: S58) is a company providing food solutions and gateway services solutions. The Food Solutions covers airline catering, food distribution, industrial catering, while Gateway Solutions is involved in ground-handling services, flights and cargo.

It has been a stock-market darling for the past five years. Its shares are up by 126%!

We have written extensively about the company. Sudhan P has highlighted how the company makes money, while I have written about how the company spends its money.

Yet, any analysis is never complete without talking about profit.

Given that SATS has three different business segments, how does each business segment fare?

Simple analysis of profitability of business segments:

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A further step could be to look at the return on invested capital (ROIC) instead of the ROE. Doing so, may reveal that Food Solutions is even more profitable than it seems, since ROIC calculation excludes intangible assets and associates.

Conclusion:

In summary, the Food Solutions business is the most profitable segment due to its high ROE.

As such, for SATS to become an even more “valuable” company, it is important that it grows its Food Solution segment, whilst improving the overall profitability of the other two segments.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.