Does SATS Ltd (SGX:S58) Classify Itself as a Dividend Play?










With more than 60 years in the business, Singapore Airport Terminal Services (SATS) Ltd (SGX: S58) provides gateway services and food solutions within the Asian region.


The Group not only operates in the aviation sector (sector contributes roughly 80% of the Group’s total revenue) but also in hospitality, food, healthcare, freight and logistics. With close to S$2 billion in asset size, SATS Ltd runs on a low-debt business model. Total debt / equity stood at around 0.08x.


Its two main business segments are:


Food Solutions

The Group’s food solutions business include airline catering, institutional catering and food distribution. SATS Ltd is the leading inflight caterer at Changi Airport, serving to more than 40 airlines which corresponds to more than 80% of all flights. This business segment produced over 26 million meals in the last annual results and have secured 12 new/returning contracts with customers including British Airways, Cathay Pacific Airways and Etihad Airways. In Japan, the Group’s inflight catering subsidiary, TFK Corporation services 40 airlines across its operations at both Narita and Haneda airports, holding a market share of approximately 50% and 40% respectively. TFK Corporation also secured new contracts from Philippines Airlines, Shanghai Airlines and Spring Japan Airlines.


Gateway Solutions

Gateway Services segment include passenget services and lounge management, ramp & baggage handling, airfreight halding & logistics and aviation security. In Changni Airport, the Group handles close to 60 airlines and have added close to 30 ground and cargo handling contracts with customers including Cathay Pacific Cargo, Singapore Airlines Cargo and All Nippon Airways.


Any opportunity for a dividend play?

Revenue growth for the Group has been stable albeit at a slow rate with a CAGR of 3.8% between FY2010 and FY2014 (financial year ends at Mar). In FY2014, the Group’s total turnover stood at S$1.79 billion. In its latest financial year results, 62% of its revenue is derived from its food solutions business whilst 38% comes from its gateway services business. SATS’s net margin has been largely stable, averaging 10.5% between FY2010 and FY2014. Its ROE has consistently produced 12% on average.


Moreover, with the Group’s relatively low capital spending and cash generative business, SATS have been able to consistently pay out dividends over the past 4 years.


Year Dividends per share (SGD) Dividend payout

Earnings per share (SGD)

FY2010 0.08 0.785 0.167
FY2011 0.12 0.984 0.173
FY2012 0.21 168.6 0.154
FY2013 0.1 0.907 0.165
FY2014 0.08 0.808 0.16


Value in Action 

With a 4.4% current dividend yield and a consistent dividend payout ratio, could this be a worthwhile story to look at?


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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.

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