Sats aims to increase revenue to $8b by 2028 in its next phase of expansion

SINGAPORE - Mainboard-listed aviation cargo and food specialist Sats is embarking on an ambitious plan to increase revenue by about 60 per cent to $8 billion over the next four years, as it works to build on its sterling set of full-year results that exceeded expectations.

Notably, the group is banking on the synergies that it will derive from the successful integration of its 2022 acquisition of European air cargo player World Flight Services (WFS), earnings of which it has consolidated for the first time in its latest results.

This next phase of expansion – dubbed “transform and perform” – is expected to see the group take a trajectory with an annual compounded growth rate of more than 6 per cent over the medium term.

Already, the impact of WFS’ contributions is clear.

Revenue almost trebled from $1.76 billion for 2023 to $5.15 billion for the year under review. At the same time, profit after tax and minority interests (Patmi) – or profits due to Sats and its shareholders after accounting for minority stakeholders – reached $56.4 million, reversing from a loss of $26.5 million for the corresponding period a year ago.

Speaking at a results briefing on May 30, Sats chief executive officer Kerry Mok said: “We have a clear strategy for each of the group’s business lines, and we have a strong operating platform from which to do it.”

He said there were five strategic priorities aimed at delivering value creation.

These are growing revenue to underpin sustained business growth; driving operating leverage through better cost efficiency and productivity; rationalising its portfolio; repaying debt while optimising cash flow; as well as returning value to shareholders.

Mr Mok summarised this as Sats’ 3Rs: repay loans, re-invest in capital expenditure and resume dividends. On that last point, the group declared a final dividend of 1.5 cents per share for the full year to March 31.

He said that because the group is on “a growth path”, it could not go back to the previous dividend policy of 70 per cent to 80 per cent of underlying net earnings.

Mr Mok added: “While we want to reward shareholders, we have better uses for that capital.”

CGS International equity research analyst Tay Wee Kuang said: “The resumption of dividends is a sign of confidence... management has done well to communicate that expectations should be tempered with priorities to repay debt and re-invest in capital expenditure for the next year.”

Mr Tay added that he was pleasantly surprised by Sats’ quarter-on-quarter improvement in net profits, despite seasonally lower revenues.

“Contribution from its associates and joint ventures have grown from strength to strength, even higher than pre-Covid levels. Meanwhile, cost management seems to have reaped benefits as well, enhancing the group’s profitability profile,” he said.

Commenting on the group’s plans, Mr Tay said: “I believe with the newfound capabilities as a global cargo leader with a diversified exposure, there is potential for Sats to work towards the goal.”

He said, however, that he was cognisant of “the cyclicality affecting the industry, which is heavily dictated by the global macroeconomic outlook”.

DBS equity research analyst Jason Sum said: “The strategy that they’ve laid out does appear sound, in our view.” However, he added that their long-term targets for revenue and return on equity, a measure of profitability, “certainly appear ambitious”.

Mr Mok closed the briefing with a promise of more to come when Sats hosts its capital markets day this November.

“We are very optimistic about the way forward,” he said.

Sats’ shares closed 6 per cent higher at $2.79 on May 30, with 27.7 million shares traded – the highest volume since Jan 30.