Presently, he notes that it is still too early and difficult to quantitatively assess the full impact of the tariff war at this juncture.
He writes in his Apr 9 report: “Nevertheless, given the important role of the US in global trade, representing about 11% of global gross trade value, we believe the US’ tariff hikes on the rest of the world and the potential retaliation it faces would have profound negative impacts on global trade.”
For the group, Chen sees that the heavier-than-expected tariffs imposed by the US on trading partners and China’s committed retaliation represent a new negative, as about 50% of Sats’ revenue comes from global air cargo handling.
The US is also Sats’ largest air cargo handling market, forming about half of the group's total cargo handling revenue and taking up around 25% of group revenue.
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Furthermore, along with the tariffs, the US has also announced that air cargo from China and Hong Kong will no longer enjoy the de minimis tax exemption policy from May 2 onwards.
To this end, Chen is unsurprised.
In his Feb 4 update report, he has estimated the negative earnings impacts on Sats from the de minimis tax changes to be capped at a high single-digit percentage, assuming that the US cross-border e-commerce volume will shrink by 30% and Sats can efficiently adjust its workforce size to match potential changes in air cargo handling volume.
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“We had duly made earnings cuts to reflect the negative impacts from the de minimis tax change,” writes Chen.
As a result, Chen has cut his FY2026 to FY2027 cargo handling volume projections by 5% and earnings forecasts by 17% to 18%.
He writes: “It is difficult to reliably estimate the potential negative impacts of the tariff war on Sats’ air cargo handling volume, as the situation is still developing, and it is hard to project at what levels the global trade volume will eventually stabilise in a new steady state.”
“Having said that, given Trump’s commitment to bring back more production to the US, our base case is that even with successful negotiations with some trade partners, the net outcome of the tariff war/negotiations would be still a lower level of global trade volume than without the tariff war,” adds Chen.
With this, the analyst has tentatively incorporated an additional 5% cut in the group’s total cargo handling volume in FY2026 on top of the previously projected 2% y-o-y drop due to the de minimis tax change, bringing the total projected y-o-y drop in Sats’ air cargo handling volume in FY2026 to 7%.
His updated earnings forecasts for Sats now stands at $240 million, $226 million and $256 million in the FY2025, FY2026 and FY2027 respectively.
Chen writes: “While we believe air cargo transportation remains a key means for global trade flow, and we like Sats for its global market leadership and strong competitive advantages against peers, it is hard to be bullish on SATS at this juncture given the significant uncertainties for global trade in the medium term.”
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His updated TP is based on 16.8 times FY2027 price-to-earnings ratio (P/E), now pegged to one standard deviation (s.d.) below Sats’ historical mean P/E of 19.9 times.
“Investors should stay vigilant about the development of the global trade landscape, as signs of stabilisation of the global trade outlook could be a re-rating catalyst for Sats,” writes Chen.
A worse-than-expected impact on global air cargo volume from further escalation of the global trade war is the main key risk noted by the analyst.
As at 2.35 pm, shares in Sats are trading 23 cents lower or 8.68% down at $2.42.
