$SATS(S58.SI)$  $5 Target Price

*SATS Ltd (SGX: S58)* — FY26 was a record year: revenue *S$6.35B +9.0%*, PATMI *S$285.2M +17.0%*, EBITDA *S$1.15B*. 1Q FY27 kept growing: revenue *+11.3% to S$1.68B*, PATMI *+6.0% to S$75.1M*.

Growth Catalysts for SATS

SATS has shifted from post-COVID recovery to global cargo + food scaling.

### *1. Gateway Services — Still the Engine (78% of Revenue)*

- FY26 Gateway revenue *+10.8% to S$4.95B*.

- Cargo volumes have *outperformed IATA for 10 consecutive quarters*. 1Q FY27 cargo tonnage *2.59M tonnes, +8.6% YoY*, record high.

- Drivers: Resilient tech / e-commerce flows, AI chip shipments (Singapore airfreight +8.4% YTD), and trade-flow rerouting.

- Market share gains: Moving from fragmented local contracts to *Global Master Service Agreements* with majors like Emirates SkyCargo, Turkish Airlines, China Southern Cargo, Air India.

### *2. WFS Integration — The Global Platform*

- 2023 acquisition of Worldwide Flight Services (WFS) for S$1.8B turned SATS into the *world's largest air cargo handler — 225 stations in 27 countries*.

- Synergies still to come: cross-selling, procurement, network density. Deleveraging is ongoing — total debt S$4.2B, net debt ~S$3.5B incl. leases.

- Management's FY29 target: *Revenue >S$8B, EBITDA margin >=20%, ROE 15%* (vs 18.1% and ∼7-8% now).

### *3. Food Solutions — Next Growth Leg*

FY26 Food revenue +2.9% to S$1.39B, but this is where the next margin lift is expected:

- *Thailand central kitchen* — commenced Oct 2026, meaningful contribution expected in FY27E. Maybank raised FY27E earnings +9.7% on this alone

- Expansion beyond inflight catering into *ready-to-eat, fresh frozen, institutional food* in China and India.

- Improving utilisation of central kitchens in China/India, plus new wins at Marina Bay Cruise Centre.

- Structural demand for convenient food, decoupled from aviation cycles.

### *4. Changi + Singapore Aviation Tailwind*

- Changi handled *record 69.98M passengers in 2025* (vs 68.3M in 2019). Jan-Aug 2026: 46.7M.

- *Terminal 5 (mid-2030s)* will add ∼50M capacity — long-term volume guarantee for SATS ground handling / catering.

- SATS earns per flight, per tonne, per meal — so more flights = more business even if SIA's own margins are pressured.

### *5. Operating Leverage + Dividend Recovery*

- Operating profit FY26 *+14.2% to S$543.3M*, margin 8.2% -> 8.6%.

- Dividend raised *+40% to 7.0 cents* for FY26 (from 5.0c), implied institutional confidence. Free cash flow S$726M last FY covers it with room to grow.

- Productivity push: automation, digitalisation, AI for cargo handling to offset labour cost inflation.

*Bottom line:* SATS  growth catalysts are 1) Cargo outperformance + WFS global contracts, 2) Food Solutions scaling (Thailand kitchen), 3) Changi growth to T5, and 4) Delivering on FY29 targets: >S$8B revenue, 20% EBITDA margin, 15% ROE.