Analysts up Sats target prices on cargo recovery, strategic growth

[SINGAPORE] Analysts from UOB Kay Hian (UOBKH) and Maybank Research have maintained a “buy” on ground handler and caterer Sats , while raising their target prices.

This comes on the back of a strong global air cargo rebound and increased confidence in the group’s long-term growth pipeline.

In a sector update on Jul 2, UOBKH analyst Roy Chen raised his target price for Sats to S$5, up from S$4.75. This came as Maybank Research analysts Liu Miaomiao and Eric Ong on Jul 1 upgraded their target price to S$5.09, up from S$4.52.

Leading the optimism is a faster-than-expected recovery in the global air freight market. UOBKH forecast Sats to post a 12 per cent year-on-year net profit growth to S$80 million for its first quarter of the 2027 financial year. The brokerage also upgraded its FY2027 to FY2029 earnings forecasts by 4 to 5 per cent, citing this improved cargo outlook.

Sats will announce its Q1 FY2027 business update on Aug 19.

The company continues to gain air cargo handling market share, noted UOBKH, with its cargo volume projected to grow by nearly 10 per cent year on year in Q1.

Its ground-handling volume is also expected to record a high single-digit growth, supported by higher business volume in the Americas after signing new contracts with Allegiant Air and Azul Airlines.

However, Sats’ food business faces temporary headwinds. Volume growth is likely to be slower, in the low-to-mid single digits, due to increased flight cancellations during the April to May period amid fuel supply fears.

Despite short-term volatility, Chen noted that Sats has deleveraged its balance sheet from a 90 per cent net gearing immediately after the Worldwide Flight Services acquisition to a 55 per cent level as at end-FY2026.

SEE ALSO

Sats, Venture are top STI performers in record-setting May

Sats may reward shareholders with special dividend if there’s spare cash

Sats posts 31% rise in Q4 profit despite impact of Middle East conflict

How Sats CEO Kerry Mok turned the group’s lowest ebb into sky-high results on a global stage 

More

He added that this provides Sats more flexibility to enhance shareholder returns by potentially raising dividends or making bolt-on acquisitions.

Food solutions the next growth engine

Maybank’s analysts echoed the positive sentiment, expressing greater confidence in management’s ability to deliver on financial targets.

The brokerage reduced its weighted average cost of capital (WACC) to 10 per cent from 10.6 per cent and increased its FY2026 and FY2027 earnings forecasts by 2.5 per cent and 9.7 per cent, respectively.

While Sats’ cargo volumes have outperformed the International Air Transport Association for 10 consecutive quarters, Maybank predicted the next major earnings leg will shift from cargo to food solutions.

Its Thailand central kitchen, scheduled to commence operations in October, is expected to centralise frozen meal production and improve utilisation across the group’s regional kitchen network.

Meaningful earnings contributions from food solutions are expected from FY2027, with margins expanding as production scales and operating leverage improves.

Maybank added that Sats’ management has reaffirmed its FY2029 targets. The group remains on track to achieve revenue exceeding S$8 billion, an earnings margin of at least 20 per cent and a return on equity of 15 per cent, supported by sustained market share gains and selective inorganic expansion.