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What Does SATS Ltd Do and How Does it Make its Money?

It is important to know what a particular company does and how it makes its money before investing in it. Investing in a business without such a knowledge is akin to travelling to an unknown territory without a map.

On that note, let’s take a look at what SATS Ltd (SGX: S58), a constituent of the Straits Times Index (SGX: ^STI), is involved in and how it generates its revenue.

The company, which has been in business for more than 65 years, has three business segments and the table below shows their respective revenue contributions in the financial year ended 31 March 2017 (FY2016-17):

Source: SATS Ltd’s Annual Report 2016/2017

Revenue from Food Solutions, which made up 56.3% of SATS’s total revenue in FY2016-17, comes mainly from inflight catering, institutional catering, food processing, distribution services, and airline laundry services.

Gateway Services, the next big chunk of SATS’s total revenue at 43.47%, is where SATS provides airport and cruise terminal services – think ground and cargo handling, passenger and security services, baggage handling services, apron services, and cargo logistics services.

Revenue from the last and smallest segment, Others, comes largely from SATS renting out certain premises.

Besides separating its revenue streams by business segments, SATS also looks at its revenue by industry. Under this format, the company splits its revenue into two industry classifications: Aviation and Non-Aviation. Here’s the revenue contributions of those industry groups in FY2016-17:

Source: SATS Ltd’s Annual Report 2016/2017

It is worth noting that for FY2016-17, SATS handled close to 52 million passengers and 171,000 flights. In the previous year, the figures were at 48 million and 162,000 flights respectively.

Behind every ticker symbol lies a living, breathing business. Buying a stock without fundamental knowledge of what the company does and how it makes money can be dangerous.

Once we know the basics of a company’s revenue streams, we can then delve into other aspects of the firm such as its profitability, strength of its balance sheet, its cash generating abilities, and more.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of SATS Ltd.