FOOD & BEVERAGE | Staff Reporter, Singapore

SATS' profits up 5% to $65.2m in Q2

Thanks to higher contributions from Indonesia, India, and China.

SATS Limited's (SATS) underlying profits rose by 5% YoY from $62.1m last year to $65.2m in Q2.

The profits exclude the $7m gain from the disposal of the equity interest in SATS HK and the restructuring of Jilin JVCo.

According to OCBC Investment Research, revenue fell slightly by 0.8% YoY to $434.8m, as growth in its gateway services business, which grew 2.3%, was offset by the decline in food solutions, which dipped 3.1%, mainly due to weaker operations in Japan on lower volume of meals.

However, the share of profits from associates and joint ventures (JV) jumped 56.5% to $18m on higher contribution from Indonesia, India, and China.

Here's more from OCBC Investment Research:

Looking ahead, we see several positive longterm growth drivers. More notably, it recently entered into a ground handling partnership with AirAsia that is expected to commence before end FY18.

The partnership will expand SATS’ footprint to some of the busiest airports in Malaysia while allowing AirAsia to take a stake in its Changi Airport Terminal 4 ground handling entity. We view this partnership positively as it creates opportunities for SATS to explore expansion into Indonesia, Philippines and Thailand, of which AirAsia already has an established presence in all three.

Another potential partnership that we deem positive for SATS is the one with Turkish Airlines (THY) relating to the provision of in-flight catering services to THY and other airlines at Istanbul New Airport – it makes sense as THY will be able to provide large enough volume for SATS to invest into a catering company at the Istanbul New Airport.

That said, SATS has only entered into a memorandum of agreement with THY, with any completion of transaction subject to fulfilment of certain conditions. 

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