The Middle East conflict is seen to have limited impact, given how Sats' direct exposure is capped at between 2 and 3%, alhough the analysts acknowledge that indirect effects are harder to quantify.
Europe, Middle East and Asia routes, the market segment with bearing the exposure, accounts for around 40% of the company's cargo volumes and UBS estimates that every 1% decline will reduce the company's patmi by 2%.
"Over the medium to long term, we think scaling specialised cargo handling should support margin expansion," state Leong and Tan, referring to offerings such as temperature controlled handling," state Leong and Tan.
There's another reason to be bullish about Sats - the company's much expanded central kitchen space in Thailand, which can not just drive revenue growth but do so more efficiently. Due for completion soon, production capacity will increase 5 times to 108,000 meals daily.
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"We believe higher utilisation and a shift to lower-cost fresh frozen meals should deliver cost savings versus Singapore operations, supporting earnings via operating leverage and reduced wastage," suggest Leong and Tan.
They are projecting overall food-related revenue to increase by 6% in the current FY2026, 6% in the following FY2027 and 10% come FY2028, to reach $1.7 billion.
With a projected payout ratio of 30%, Sats is seen to give a dividend yield of 1.7% for FY2026.
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Their new target price of $4.35 is pegged to a one-year forward PE of 20x.
Sats shares closed at $3.56 on March 27, up 0.28%.
