SATS Ltd (SGX: S58) Share Price at S$3.14: What's the Business Behind This?
When investing in a stock, we should go beyond its ticker symbol and share price to find out what business it is involved in.
As Benjamin Graham, the father of value investing, once said:
“Investing is most prudent when it is business-like”
On that note, let’s find out more about SATS Ltd (SGX: S58) to understand more about it as a company, from an investor’s perspective, in just under a minute.
What’s SATS Ltd’s Business About?
SATS provides food solutions and gateway services solutions, largely to the aviation industry.
The food solutions segment provides in-flight catering and institutional catering, among other things.
Meanwhile, the gateway services division offers services such as ground and cargo handling, passenger and security services, and baggage handling services.
SATS Ltd’s Financial Highlights
SATS saw slight growth in its business from FY2014-15 to FY2018-19 (the company has a 31 March year-end):
FY2014-15 FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20
1,753.2 1,698.2 1,729.4 1,724.6 1,828.0 1,941.2
Share of results of associates/joint ventures, net of tax
48.1 48.0 65.2 71.2 58.9 11.8
Profit attributable to shareholders
195.7 220.6 257.9 261.5 248.4 168.4
Underlying net profit
195.9 218.1 234.3 236.1 241.4 180.3
Net margin (%) 10.9 12.9 15.1 15.4 14.0 9.0
Total revenue climbed from S$1.75 billion in FY2014-15 to S$1.83 billion in FY2018-19, translating to an annualised growth rate of 1% over the last five years.
Meanwhile, its profit attributable to shareholders grew around 6% per annum, from S$195.7 million to S$248.4 million.
However, in FY2019-20, net profit plunged 32.2% year-on-year as global headwinds due to COVID-19 took a heavy toll on SATS’ financial performance.
In its fourth quarter, the company went into a net loss of S$6.3 million, compared to a net profit of S$49.9 million a year ago.
SATS Ltd’s Dividend History
From FY2014-15 to FY2018-19, SATS rewarded shareholders well with dividends growing at around 8% per year.
For FY2019-20, though, due to “significant uncertainties about the trajectory of the pandemic and its impact on the economy and travel”, SATS had to cut its dividend.
Total dividend per share
Major Risk For SATS Ltd To Take Note Of
The biggest risk for SATS right now is to do with COVID-19.
The International Air Transport Association (IATA) predicts that air travel will not return to pre-coronavirus levels until 2024.
Since SATS relies heavily on the aviation industry, its business recovery hinges on the rebound of the aviation sector.
SATS Ltd’s Share Price And Valuation
Over the past five years, SATS’ share price has fallen 18% largely due to poor market sentiments surrounding the business since the pandemic struck.
At its share price of S$3.14, SATS has a price-to-earnings (P/E) ratio of 24x and a dividend yield of 3.7%.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the company mentioned.