Lim believes investors are showing their appreciation for Sats' strong set of FY2026 ended March 31 results and sentiment has improved amid progress towards ending the conflict in the Middle East.
"Sats is now trading above pre-Iran War levels, and while we acknowledge the incremental positives arising from a potential resolution, we also note that a peace deal does not imply an immediate return to pre-war normalcy," she warns.
For now, she is keeping her estimates for the company ahead of its 1QFY2027 business update. Her fair value of $4.20 is pegged to 20 times FY2027 earnings.
"Nonetheless, we remain constructive on the company’s long-term outlook, supported by resilient air cargo demand and an extensive global network post-acquisition of Worldwide Flight Services," says Lim, referring to the transformational acquisition made by Sats to broaden its reach from one focused on ground handling and catering to cargo handling.
See also: SGX to see continued SDAV upside from EQDP cycle: DBS, RHB
She notes that Sats has laid down targets to grow its total to more than $8 billion by FY2029, and target ebitda margin of at least 20% and return on equity (ROE) of at least 15% respectively.
"Much will be dependent on management’s ability to execute, in our view, especially amidst global trade uncertainty, and we keep an eye out for Sats’ growth trajectory in subsequent quarters for further re-rating catalysts," says Lim.
From Lim's perspective, potential catalysts for Sats include stronger-than-expected cash flow generation ability due to positive revenue growth momentum and/or effective cost structure optimisation; growth in associates and joint ventures’ contributions and a higher-than-expected dividend payout ratio.
See also: Citi’s top picks in the real estate world are CICT, MPACT, CLAR, CDL and UOL
On the other hand, risks include macroeconomic concerns and trade uncertainty may dampen demand for Sats’ services and weigh on the broader aviation industry; sticky inflation places pressure on margins and execution hiccups such as those involving food safety.
Sats’ shares, as at 3.18 pm, traded at $4.53, up 0.89% thus far today and extending a gain of 19.53% year to date.
