Can SATS shares mount a comeback this year?

• SATS Ltd (SGX: S58) share price fell to S$4.29 on Wednesday morning (01 June 2022)
• The aviation service provider’s stock is currently trading at its lowest price level since 12 May 2022
• The group’s second half revenue rose 15% year-on-year, but operating losses went up
• Keen to trade SATS shares? Open an account with us to long or short the stock

SATS share price: why is it falling?

SATS’ share price has crashed by nearly 5% since releasing its results for the second half of FY2021/2022.

Last month, the in-flight and ground handling service provider’s stock sunk to a low of S$4.26 on 12 May 2022, as concerns of the global economic impact from China’s stringent Covid-19 measures reached a fever pitch.

However, its share price is up by around 11% on a year-to-date basis, with the aviation sector expected to pick up this year.

In terms of outlook, SATS’ shares have an average rating close to ‘outperform’ and a consensus price target of S$4.33, based on the latest SGX StockFacts data. The price target is in line with the stock’s last traded price on Wednesday.

The latest investment thesis came from DBS’ equity research team, who rated the stock a ‘buy’ call alongside a price target of S$4.90 a share.

Why did SATS record a S$46.6 million operating loss in H2?

SATS’ group revenue rose from S$529.5 million to S$607.3 million in the second half of FY2021/2022, a year-on-year (YoY) improvement of 14.7%.

By business segments, food solutions revenue increased by 10.8%, or S$32.3 million, to S$330.6 million, while gateway services revenue grew 19.5%, or S$44.9 million, to S$275.2 million YoY.

SATS said its group expenditure grew by 29.8% YoY to S$653.9 million, after it ‘actively ramped up its operations to support travel recovery’ in this half. This can be seen in terms of the increased headcount and higher contract services.

However, tapering government grants meant staff costs were driven up by 56.5%, or S$110.9 million. Meanwhile, raw material costs grew in tandem with higher business volume in food solutions.

Impacted by higher tariffs and usage, the group’s premises and utility expenses also increased by 41.1% from the same period a year ago, due to higher tariffs and usage.

Higher fuel costs, provision for doubtful debts, and lower government grants also drove other costs up by S$27.5 million.

As a result, the group recorded an operating loss of S$46.6 million in this half, against an operating profit of S$25.9 million a year ago.

Finally, profit attributable to shareholders amounted to S$7.2 million in H2, up from a loss of S$2 million a year ago.

Interested to trade SATS shares?

Go long or short via CFDs on SATS and other Singapore shares with our award-winning platform.* Open an account with us to start trading shares immediately.

_{*Awarded the Best Online Trading Platform by Influential Brands in 2021.}