"Moreover, Sats' non-travel-related food business should also register healthy growth, underpinned by the group’s expanding product portfolio and customer base, and increased production capacity and footprint," the analyst adds.
Also, Sum expects the recent acquisition of WFS to start yielding operational and financial synergies over the next few years.
In addition, Sats has completed the refinancing of WFS’s costly debt, with meaningful interest savings to materialise from the current FY2025.
"More importantly, the market will be paying attention to the assimilation of WFS, and whether the group can achieve its intended operating synergies within its projected timeline, to justify
the hefty price tag on WFS," says Sum.
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He estimates that Sats' core earnings per share would reach 18.7 cents in FY2026, representing 84% of the pre-pandemic FY2019 level.
Sum's target price of $3.40 is based on a blended forward EV/Ebitda multiple of 8.5x for FY2024 and FY2025.
For Sum, key risks include global macroeconomic instability that could delay the normalisation of air passenger traffic or negatively impact air cargo volumes.
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Additionally, there are potential execution risks associated with integrating WFS and achieving the anticipated synergies, he adds.
As at 11.16am, Sats shares changed hands at $2.58, down 0.39%.
