“We believe its extensive cargo network also enabled SATS to capture the re-routing opportunities that have emerged as a result of supply chain disruptions arising from the Middle East crisis, which began on end February, similar to past disruptions such as the Red Sea Crisis in 2024 and higher tariffs post Liberation Day in 2025,” according to Tay and Lim.
At the same time, SATS’ management explains that growth in air cargo demand continues to be driven by the technology and e-commerce industries.
Meanwhile, SATS revealed that it is seeking opportunities to expand its air cargo operations into regions where it currently has limited or no presence such as Latin America, Africa, Central Asia. According to the company, any form of expansion can take form beyond M&As, such as joint ventures and operating contracts with air cargo station owners and operators.
“SATS’s key considerations for expansion of its cargo operations include retaining operational oversight to ensure delivery of its service levels, as well as whether the location serves a strategic purpose, such as entry into a key cargo hub to enhance its cargo network to better serve its existing customers,” the CGSI team explains.
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On the financial target front, SATS’ management shared that it is on track to achieve its FY2029 financial targets of $8 billion revenue, 20% EBITDA margins, 10% EBIT margin and 15% ROE.
From Tay and Lim’s perspective, in order for SATS to achieve its FY2029 targets, they believe SATS will need to augment its current organic growth trajectory with bolt-on acquisitions, which has yet to be factored in by their estimates.
To reflect better profitability, they have lifted their FY2027 and FY2028 earnings per share (EPS) by 0.9% and 7.5%. However, they have also reduced FY2029’s EPS by 19.9% due to underestimation of OPEX and tax rate previously.
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With that, their DCF-based target price for SATS is raised to $5.20, from the previous target price of $4.68. Both analysts have assigned a lower WACC of 10.2% from 11.2% previously to reflect lower risk premium associated with its resilient business model given its more diversified geographical footprint today.
“We reiterate our “add” call as we see visibility for SATS to achieve a 3-year net profit CAGR beyond 18%,” they add.
Some of the re-rating catalysts includes an uptick in food solutions profitability and entry into new key air cargo hubs while downside risks mainly come from a deteriorating global economy resulting in slowdown in e-commerce volumes and weakened consumer sentiment.
As of 4.00pm, shares in SATS are trading 13 cents higher, or 3.11% up at $4.31.
