The Cargo Handler The Market Still Prices As A Caterer.
Written June 2026, before the FY26 results. The updated view is here.
If you still think of SATS as Singapore Airlines’ old catering arm, you’ve missed the last three years.
It is now the largest air cargo handler in the world.
My blended entry is SGD3.56. The stock is around SGD3.53.
So I’m basically flat.
I’m writing this down because I want something I can come back to later and see whether the thesis actually played out.
The Big Picture
SATS isn’t cheap on trailing numbers.
I’m not going to pretend it is.
The entire investment case comes back to the acquisition of Worldwide Flight Services in 2023.
It tripled revenue, turned SATS from a largely passenger-facing business into a global cargo and ground-handling platform, and gave it a network across 27 countries that would have taken years to build organically.
The market hated the deal initially.
I understood why.
The rights issue was painful. Debt was high. And acquisitions of this size usually have a way of looking better on PowerPoint than they do in the accounts.
So far, this one is working.
Integration is ahead of schedule and margins are moving in the right direction.
This is not a value investment.
I’m buying earnings growth and deleveraging.
If management misses the roadmap, there isn’t much valuation support underneath me.
The Case For SATS
Scale is the moat.
More than 215 stations across 27 countries, covering routes that carry more than half of the world’s air cargo.
Airport access isn’t something you can recreate overnight. The incumbent usually has the relationships, licences and operating infrastructure.
That’s valuable.
Operating leverage is finally showing up.
3Q FY2026 net profit rose 20.4% to SGD84.7 million on 8% revenue growth.
EBITDA margin went from 17.3% to 18.1%.
That’s the number I care about.
If revenue grows 8% and profit grows 20%, the acquisition is starting to do what it was supposed to do.
Cargo volumes are at records.
2.55 million tonnes in the quarter, with both APAC and EMEAA growing double digits.
That’s difficult to ignore.
Cash flow is going towards the balance sheet.
Nine-month free cash flow was SGD369.9 million.
SGD100 million of medium-term notes were repaid in April 2025.
Deleveraging is the second half of this thesis.
The more debt comes down, the more comfortable I am paying for the earnings growth.
E-commerce isn’t going away.
Southeast Asian e-commerce is still growing at roughly 22% annually.
SATS sits in the middle of that freight flow.
It doesn’t need an economic boom for cargo volumes to keep growing.
What To Keep An Eye On
Leverage.
SGD620 million of cash against SGD2.4 billion of borrowings.
The direction matters more than the absolute number.
It has to keep going down.
Trade policy.
The Americas segment saw revenue fall 6.9% because of tariffs.
APAC and EMEAA have more than offset that so far.
But SATS doesn’t get to choose what happens to global trade.
The dividend is not the reason to own this.
Consensus is around SGD0.06 for FY2026.
That’s roughly 1.5%.
If you need income, this isn’t the stock.
I’d rather say that plainly than dress up a 1.5% yield as a “growing income story”.
The valuation is fair, not cheap.
Forward P/E is around 16 times.
There isn’t much room for multiple expansion.
The return has to come from earnings.
What The Numbers Look Like
FY2025 revenue was SGD5.82 billion, up 13%.
Earnings rose 332% to SGD243.8 million, although that percentage is flattered by the low base.
The more useful number is the level of earnings.
By 3Q FY2026, revenue was up another 8% to SGD1.6 billion.
Management is targeting SGD8 billion revenue and 15% ROE by FY2029.
Those targets are useful because we can actually check them every quarter.
I haven’t rebuilt management’s ROE bridge myself, so I’m taking that part on trust for now.
Valuation: What’s It Worth?
SATS trades around SGD3.53.
The 52-week range is roughly SGD2.42 to SGD4.00.
Consensus target is around SGD4.46, or roughly 26% upside.
Nine out of nine brokerages are Buy or Strong Buy.
I’m not particularly comforted by that.
When everyone agrees on the story, a missed quarter gets punished more heavily.
The Bottom Line
My blended entry is SGD3.56.
I’m holding.
The dividend isn’t enough to anchor the valuation, so I’m watching the debt instead.
Below SGD3.00 I’d add.
At that price you’re paying under 14 times forward earnings for a business that management expects to reach SGD8 billion revenue by FY2029.
And SGD3.00 doesn’t require a catastrophe. It has already traded within that range over the past year.
Things I’m watching from here: quarterly debt reduction, APAC and EMEAA cargo volumes, whether EBITDA margin stays above 18%, and whether the Americas business stabilises.
Patient money.
Not cheap money.
Disclaimer
This is not investment advice. The information may not be accurate. If in doubt, seek professional advice. Do your own research. The author is not responsible for any losses you may suffer from taking a position in any asset mentioned here.