Choonawat notes that US shippers, which accounts for around 30% of global air and ocean freight demand, continue to pull-forward demand ahead of another round of potential Trump tariffs.
“We lift FY2024/2025 air-cargo volume growth to 7% leading to 2.5% increases in absolute terms across FY2024/2025 to FY2026/2027,” continues Choonawat in his Oct 24 report.
He adds that an increase in air-cargo volume leads to a 1% increase in revenue, a 5% rise in earnings before interest, taxes, depreciation and amortisation (ebitda) and a growth of 12% in core earnings respectively.
Together with positive operating leverage, global air-cargo volume growth having turned positive y-o-y since August 2023 and Changi’s traffic already reaching pre-Covid levels in 1HCY2024, Choonawat is increasingly confident of Sats’ sequential earnings recovery.
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Overall, the analyst’s target price continues to be based on a 20 times 1HFY2026 price-to-earnings ratio (P/E), which is in-line with Sats’ pre-Covid range and the 2024 average of major global air-freight forwarders.
Key downside risks noted by him include ongoing consumption shifts to services potentially lasting into 2024, which could lead to demand recovery from restocking falter in the second half of this year. Other risks include labour cost pressure, global recession dragging air freight and passenger volume, as well as aggressive trade protectionisms slowing down air-cargo demand.
As at 5.15 pm, shares in Sats are trading 27 cents higher or 7.22% up at $4.01.
