Here are six things that may result in lower margins for SATS

Falling yields of airlines could translate to pricing pressure.

SATS reported a 7.4% increase in core PATMI to $234.3m for the past quarter, which included one-off items.

However, OCBC Investment Research noted that there are four factors that may hamper SATS’ margins.

For one, falling yields can result in pricing pressure for SATS, therefore lowering its margins. More so, non-recurring items recognised in the past financial year will be difficult to surpass in the current year from just increasing productivity.

Meanwhile, lower government subsidy of staff costs and the cessation of franchise fee rebates could also mean lower margins for the group.

OCBC Investment Research also cited the higher depreciation as a culprit, given the expected increase in capital expenditures. The rest of the group's costs are also seen to grow, in line with the expansion of SATS business.

"We believe near-term growth will moderate along with margins under pressure. Over the longer-term, along with the growing capacity of Changi Airport, we continue to expect SATS’ strategy of diversifying out of Singapore through partnerships and/or M&A activities to drive positive growth," the brokerage firm said.