Maybank initiates ‘buy’ on Sats, citing cargo growth prospects

[SINGAPORE] Maybank has initiated a “buy” on Sats and set its target price at S$4.52 – even as the Middle East conflict causes travel disruptions and US tariffs weigh on its gateway services in the American market.

The in-flight caterer and ground handler is positioned to capture the rise in cargo volume from countries other than China to the US, following US rules that have disrupted online shopping deliveries, said Maybank in a note on Saturday (Mar 14).

The target price represents a 25 per cent upside to Sats’ closing price of S$3.61 on Friday. The counter fell 0.3 per cent or S$0.01 to S$3.60 on Monday.

Maybank analysts Liu Miaomiao and Eric Ong noted that Sats’ “strong market presence” in Asean as well as the Europe, Middle East and Africa regions will keep its “key growth drivers intact” amid disruptions caused by US tariffs and geopolitical tensions. 

The analysts expect earnings growth of 12.9 per cent for Sats in the 2026 financial year, in view of its “global presence and dominant position in both gateway services and food catering”. 

Sats’ earnings momentum “stayed strong” in its third quarter ended Dec 31, 2025, Maybank noted, with the cargo handler’s net profit rising 20.4 per cent to S$84.7 million, fuelled by operating leverage and margin expansion.

For the first nine months of FY2026, revenue rose 8.7 per cent year on year to S$4.72 billion. This, Maybank noted, was driven by gateway services, which grew 10.6 per cent year on year on the back of “strong cargo momentum”. 

While weakening air travel demand and rising operating costs may follow heightened geopolitical tensions, Maybank noted that “mid-term volatility should remain manageable” given Sats’ “low single-digit exposure” to the Middle East.

The company’s “strong presence in Saudi Arabia and Oman”, where medium-term traffic diversions occur, could also capture incremental volumes.

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With Singapore accounting for around 35 per cent of Sats’ revenue, the company “could benefit from airlines rerouting traffic through South-east Asia”, Maybank added. 

Weaker cargo demand, competition, rising costs

Still, the brokerage noted that Sats may face “weaker-than-expected air travel and cargo demand amid geopolitical tensions, trade disruptions or a sharper global economic slowdown”.

Competition from global ground-handling and cargo service providers may also exert pressure on pricing and Sats’ profit margins. 

Rising operational costs, such as labour, energy and logistics expenses, meanwhile, could weigh on operating margins. Air cargo accounts for about 52 per cent of the group’s total revenue, Sats Q3 FY2026 financial report indicated.

Expansions and food solution upgrades

Sats’ “post-merger synergies” were realised sooner than expected in the form of productivity gains, cost efficiencies and earnings upgrades, Maybank noted.

Earnings before interest and taxes margins are forecast to expand by 8.6 per cent, fuelled by higher throughput and productivity gains from automation and digitalisation across Sats’ global network. 

The analysts further noted that Sats’ Thailand central kitchen reached full operational capacity, providing “a scalable base to serve both regional and cross-border demand” that can support operations in Singapore and China. 

While Sats is expanding capacity by up to five times, serving about 108,000 meals per day, results may be delayed, Maybank said. “Initial utilisation is likely to be below 50 per cent, and management is actively onboarding customers to ramp up volumes.”

Sats’ earnings mix is expected to “increasingly tilt towards food solutions” from FY2026, supported by “structural shifts in airline catering preferences... for ‘fresh frozen meals’, where food is rapidly frozen at peak freshness to preserve quality”.

“Should this trend gain broader adoption across airlines, Sats is well positioned to capitalise given its early investments and operational readiness,” said the analysts.