SATS and SIA Engineering Are Seeing an Aviation Recovery: Can Their Share Prices Soar to Greater Heights?

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SATS
SATS

As the saying goes – you don’t know what you’ve got till it’s gone.

The pandemic shut down borders and kept everyone cooped up at home for more than two years.

The pent-up demand for travel and holidays built up strongly over this period and exploded once the world opened up again.

Visitor arrivals in Singapore more than doubled last year as air travel recovered with a bang, with the number of tourists more than doubling from 6.3 million in 2022 to 13.6 million.

Despite this recovery, shares of aviation-related companies SATS Ltd (SGX: S58) and SIA Engineering Co Ltd (SGX: S59), or SIAEC, have not done so well.

SATS’ share price climbed close to 7% year-to-date while SIAEC saw its share price dip by 1.7% over the same period.

With a sustained aviation recovery underway, can both companies see their share prices heading higher?

SATS: Record revenue with a return to profitability

SATS saw a return to profitability for its fiscal 2024 (FY2024) ending 31 March 2024.

The ground handler and food solutions provider saw its revenue soar threefold year on year from S$1.75 billion to S$5.1 billion because of the robust aviation recovery and consolidation with Worldwide Flight Services (WFS).

Net profit came in at S$56.4 million, a turnaround from the net loss of S$26.5 million in FY2023.

Core net profit, which excludes one-off items, logged a more than fourfold year on year increase from S$18.2 million to S$78.5 million.

The group also generated a positive free cash flow of S$326.5 million for FY2024, reversing the free cash outflow of close to S$40 million a year ago.

SATS has resumed paying dividends by declaring a final dividend of S$0.015.

The group also has a more diversified business mix to pivot away from Food Solutions.

For FY2024, 49% of its revenue came from cargo handling with another 29% coming from ground handling.

Food Solutions has been diluted down to just 22% from around 55% before the acquisition of WFS.

SATS: Clear plans to grow the business

SATS has set ambitious financial goals for FY2025.

It aims to repay S$200 million of its loans, reinvest S$300 million into capital expenditure, and resume the payment of dividends.

To do so, the group plans to strengthen relationships with key customers across its network and expand its footprint and hub solutions.

Its food solutions division will also expand via multi-channel networks to target a wider range of customers.

Just last week, SATS opened an upgraded lounge at Changi Airport Terminal 3 (T3) and has plans to refurbish lounges in both T1 and T2 in the coming years.

Its next phase of expansion, dubbed “transform and perform”, sees the group planning to increase revenue to S$8 billion by 2028.