SATS - OCBC Investment 2021-05-28: Aided By Non-Aviation Revenue

SATS LTD. (SGX:S58)

SATS - Aided By Non-Aviation Revenue

SATS (SGX:S58)’s FY21 revenue fell 50.0% y-o-y to S$970m, pulled down by lower Food Solutions (-46.4% y-o-y) and Gateway Services revenue (-55.1% y-o-y) as a result of persistent headwinds from COVID-19. Share of associates/JVs were similarly impacted which recorded a loss of S$48.0m as compared to a gain of S$11.8m in FY20.
A total of S$109m of impairment charges and credit loss provisions were made on investments and associates/JVs.
All-in, SATS's FY21 net loss attributable to shareholders was S$78.9m, as compared to PATMI of S$168.4m in FY20, in-line with our expectations.

On a q-o-q basis, SATS’s revenue rose 11.0% q-o-q to S$278.5m in 4QFY21, driven by strong cargo volume, partially offset by lower passenger and flights handled (-9.1%/-8.2% q-o-q). 4QFY21 bottomline turned to a profit of S$0.8m, after three consecutive quarters of losses, thanks to S$51.1m of government relief.
Management mentioned that SATS’s cargo volume has recovered to ~90% of pre-COVID-19 levels, driven by demand from e- Commerce, temperature sensitive supplies such as vaccines and perishables. Based on IATA’s latest forecast, cargo volume is expected to grow 13.1% y-o-y and exceed 2019 levels by 2.8% in 2021.

No dividend was declared by SATS for FY21 as compared to 6 S-cents last year to conserve cash and more jobs. Management guided that SATS needs to be profitable and generate positive cash flow without government relief before they would consider resuming dividend distribution.
SATS received S$271.8m of government grants and reliefs in FY21 and will receive another six months of JSS support from Apr to Sep 2021 which SATS will recognise over FY22.
After adjustments, our fair value estimate for SATS decreases from S$4.95 to S$4.84.
See

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-05-28

SGX Stock Analyst Report BUY MAINTAIN BUY 4.84 DOWN 4.950