Is SATS shares worth buying now? (SGX: S58 / SATS.SI)
Disclaimer: I may or may not have invest in any of them, what’s listed here is only for entertainment purpose only and it should never be used as any form of investment advice. This is my diary on my stock analysis, although I’ve been investing for +15 years reading +50 investment related books, I am still learning. I wish to share what I know and what I learn during my investment journey so you may learn from my success and mistakes as well!
SATS (Formally known as Singapore Airport Terminal Services Ltd.) is listed in SGX with the ticker symbol S58.SI / SATS.SI. SATS is a subsidiary of Singapore Airlines (SIA) and it currently has a share price of SGD$2.600.
At this price, SATS is valued at a price-to-book ratio of 1.911 and a trailing distribution yield of 0.000%
SATs is some of my personal favorite and it might be the type of dividend stocks I may buy in Singapore.
With the current valuation, would I invest in it?
As a quick recap, here are the 7 steps (fundamental analysis) that I use to pick the best Singapore dividend stocks.
- Debt to Equity Ratio
- Dividend Yield
- Dividend payout ratio
- EPS Growth Rate
- Return of Equity (ROE)
- Price-to-Book Ratio
- MOAT
Update: Singapore’s SATS had set to acquisition of Worldwide Flight Services in a SGD$1.82bn. Announced in Sep 2022, entitled shareholders will be allotted to subscribe for 323 rights shares for every 1,000 existing shares.
Recommended Read: Is dividend investing suitable for young investors?
Business Background
SATS Ltd. was founded in 1972 and was formerly known as Singapore Airport Terminal Services Limited. SATS Ltd. is based in Singapore where it is an investment holding company that mainly provides gateway services and food solutions in Singapore, Japan, and internationally.
SATS Ltd. Business Operations:
- Food Solutions. Inflight and institutional catering, food distribution and logistics, industrial catering, chilled and frozen food manufacturing
- Gateway Services. Airfreight handling, passenger services, ramp handling, baggage handling, aviation security, and aircraft interior cleaning.
- Others.
SATS’s network of ground handling and inflight catering operations spans nearly 40 airports in the Asia Pacific region
Customers of SATS Ltd.:
- Airline
- Hospitality
- Healthcare
- Food
- Education
- Airfreight and logistics industries
- Government
Debt to Equity Ratio
Check for: Less than 0.5 D/E Ratio
Looking at the latest data online:
SATS have a D/E ratio of 0.43
This is lower than the 0.5 D/E Ratio.
A D/E ratio of less than 0.5 will means that the company is having an acceptable level of debt.
With a D/E of just slightly below 0.5, it barely passes my criteria.
To understand this stock better, I’ve done a quick look at the past Debt to Equity Ratio for SATS:
| Year | D/E Ratio for SATS Ltd. |
|---|---|
| 2022 | 0.43 |
| 2021 | 0.57 |
| 2020 | 0.06 |
| 2019 | 0.07 |
| 2018 | 0.07 |
Looking at the past data of SATS, it seems that the D/E ratio only starts to rise after the outbreak of the pandemic in 2019 which is reflected by the increase in the D/E ratio in the years 2020 and 2021. Where the year 2022 as airline starts to fly the D/E ratio have made a slight decrease.
Knowing SATS’s business is highly dependent on the aviation industry, the recent pandemic has impacted SATS’s bottom line greatly.
The reduction in traveling of flights around the world has negatively impacted the company to increase its ability to generate higher revenue and income.
The company marginally drops below the D/E ratio of 0.5, and I think as the airline recovers, the metrics will also recover.
My Opinion: Pass
Dividend Yield
Check for: More than a 2.5% dividend yield
For the Year 2022, SATS pay a dividend of SGD 0.00 which is about 0.00% in dividend yield.
SATS did not pay any dividends for the years 2020, 2021, and 2022.
0.00% yield is lower than my target of 2.5%.
Looking at the distribution history, the last dividend payment is in the year 2019, which is probably due to the pandemic.
| Year | Dividend in SGD |
|---|---|
| 2022 | 0.00 |
| 2021 | 0.00 |
| 2020 | 0.00 |
| 2019 | 0.19 |
| 2018 | 0.18 |
| 2017 | 0.17 |
| 2016 | 0.16 |
| 2015 | 0.14 |
For dividend stocks, I’ll prefer if they will pay a stable dividend that is growing.
The dividend yield is also much lower than the risk-free rate (CPF OA Account) of 2.5%. I will give it a verdict of fail.
But historical data shows the dividend to be growing, the growth only stops when the pandemic occurs. This may indicate that dividends will be given out in the future when the economy recovers.
My Opinion: Fail
Dividend Payout Ratio
Check for: Less than 80% dividend payout ratio
At the time of writing, a quick check with some online tools for getting stock info shows that the dividend payout ratio for SATS is 0.00% which basically makes this section non-applicable.
With a payout ratio of 0%, it means the company retained all earnings if any, and did not payout any dividend for the financial year.
Although SATS did not payout any dividends for 2020, 2021, and 2022, it is totally understandable as its business is greatly impacted by the pandemic.
It will be wise for the management to keep enough cash to weather the storm.
Although SATS might be a good dividend stock in the future, SATS fail this section at the time of writing.
My Opinion: Fail
EPS Growth Rate
Check for: More than 10% EPS Growth
Earning Per Share (EPS) helps to analyze the profitability and quality of a stock.
Here, we will like to see an EPS growth of 5 years or more.
A quick check on the financials online:
The EPS 5 year growth rate is “Blank”!
There is no Earning Per Share (EPS) for SATS in 2022!
When there is no EPS growth rate, it means the company is not earning for the current financial year.
| Year | EPS for SATS in SGD |
|---|---|
| 2022 | 0.01 |
| 2021 | -0.02 |
| 2020 | 0.16 |
| 2019 | 0.23 |
| 2018 | 0.22 |
The cause of having a negative EPS for 2021 is probably because of the pandemic. As the flights resumed, the company starts to earn as shown in 2022 with an EPS of 0.01
My Opinion: Fail
High Return Of Equity (ROE)
Check for: More than 10% ROE
ROE is one of the most important ratios used by Warren Buffett.
Return on Equity is used to measure the management’s ability to make a return on our investment.
At the time of writing, the ROE of SATS have an ROE of -1.61%.
A deep dive into the history of SATS shows it usually has an ROE of >10% until 2021 and 2022, where it has an ROE of -5% and 1% respectively.
| Year | ROE for SATS |
|---|---|
| 2022 | -1.6% |
| 2021 | -5.0% |
| 2020 | 10.3% |
| 2019 | 15.1% |
| 2018 | 16.2% |
SATS’s historical ROE has been pretty good and is usually above 10%. But as the pandemic arise, it reduced its ROE to -1.6% thus it is reflected in 2022’s financial data.
Although SATS may have great future potential as a good dividend stock, an ROE of around -1.6% means that it is losing shareholder’s equity at 1.6% per year.
My Opinion: Fail
PRICE-TO-BOOK RATIO
Check for: P/B Ratio of less than 1.8
SATS is probably most investors’ favorite dividend stock. SATS provides almost all service for Changi airport and all airline that comes through Changi airport.
With so much attention on SATS, the price of the stock will most likely be traded above its valuation (book value).
At the time of writing, the current P/B ratio of SATS is 1.911.
Meaning, it is trading at approx. 2 times its book value. It just marginally fail this criterion.
My Opinion: Partially Fail
MOAT
Check for: Not just having a MOAT, but a great MOAT
SATS is probably the most important company that provides almost all the services for Singapore’s Changi Airport which is known for its world-class service and experience.
Similar to SIA Engineering which is the main service provider for aircraft servicing in Singapore Changi Airport, SATS provides services that are mainly customer-facing and food-oriented.
SATS is currently Asia’s leading provider of food solutions and gateway services which helps to delight customers with innovative food solutions and seamless connections.
SATS’s Top 10 Competitors
- Servair Air (Food Distributors industry)
- Gate Group (Food Processing industry)
- LSG Sky Chefs (Baked Goods, Frozen & Prepared Foods industry)
- Gate Gourmet
- Flying Food Group
- New Rest Group
- SCK Sky Catering Kitchen
- INFL
- DNATA
- Hawaiian Airlines
With its base in Singapore, SATS serves over 55 locations in 14 countries.
SATS has been described as the third most-admired company in Singapore, second for the quality of its services and for corporate reputation, and placed fourth for innovation.
According to Phil’s book Rule#1 investing, SATS has a strong ” Toll Bridge MOAT” and a “Brand MOAT”.
Toll Bridge MOAT is probably the best and most important MOAT of SATS. The toll bridge moat prevents competitors from coming into the picture, allowing SATS to have most of the business that comes through Singapore Changi Airport.
Brand MOAT can be an attractive MOAT. Providing safe food solutions and world-class gateway services is probably what SATS’s brand moat stands for.
With Singapore Changi Airport as its backer and support from Singapore’s government.
In my opinion, SATS’s MOAT is very strong.
My Opinion: Pass (Great!)
Overall
SATS has a final score of 4/10.
Today is year 2023.
In the year 2022, SATS has just recovered from the pandemic, thus there is a low level of earning thus no EPS growth rate, no dividend payout, and a low ROE.
These unfavorable financial results occur only after 2019’s pandemic which will mean it might be temporary.
Having said that, SATS has an unbeatable MOAT which will probably help the company to recover when the aviation industry recovers.
Nonetheless, I think may want to invest in this if the price is right, I personally think the impact of the pandemic is temporary and the company will recover in the next few years.
Below is how I’ve scored SATS.
| Metrics | Weightage | Score |
|---|---|---|
| Debt to Equity Ratio | High (2) | 1 |
| Dividend Yield | Low (1) | 0 |
| Dividend payout ratio | Low (1) | 0 |
| EPS Growth Rate | Low (1) | 0 |
| High Return on Equity (ROE) | Low (1) | 0 |
| Acceptable Price-to-Book Ratio | Low (1) | 0 |
| MOAT | Very High (3) | 3 |
| Total | NA | 4 |
Why Do I find Some Metrics More Important Than Others?
There are 3 attributes in a company that Warren Buffett wants in particular:
- Wonderful Company at Fair Price
- Stable & Understandable Business
- Vigilant Leadership in Risk Management
This translate to the following 3 metrics I have on my list:
Thus, for these metrics, I will put a higher weightage on my scoring.
Question…
Would you invest in this now?
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SA TS (Formally known as Singapore Airport Terminal Services Ltd.) is listed in SGX with the ticker symbol S58.SI / SATS.SI. SATS is a subsidiary of Singapore Airlines (SIA) and it currently have a share price of SGD$4.220.
At this price, SATS is valued at price-to-book ratio of 3.012 and a trailing distribution yield of 0.000%
With the current valuation, would I invest in it?
Let’s go through it using my 7 steps guide and see how I pick the Best Singapore Dividend Stocks.
Disclaimer: Information should be used for entertainment purpose only. Full disclaimer below.
[/col] [col span__sm=”12″ align=”left”] [ux_image_box img=”34225″]SATS (S58.SI / SATS.SI) 5 Year Chart
Year 2017 to 2021
[/ux_image_box] [/col] [col span__sm=”12″ align=”left”]As a quick recap, here are the 7 steps I use to pick the best Singapore Dividend Stocks.
- Debt to Equity Ratio
- Dividend Yield
- Dividend payout ratio
- EPS Growth Rate
- Return of Equity (ROE)
- Price-to-Book Ratio
- MOAT
Recommended Read: Is dividend investing suitable for young investors?
[/col] [/row] [/section] [section label=”Background”] [row label=”Intro” style=”collapse” v_align=”middle”] [col span__sm=”12″]Business Background
SATS Ltd. was founded in 1972 and was formerly known as Singapore Airport Terminal Services Limited. SATS Ltd. is based in Singapore where it is an investment holding company that mainly provides gateway service and food solution in Singapore, Japan and internationally.
SATS Ltd. Business Operations:
- Food Solutions. Inflight and institutional catering, food distribution and logistics, industrial catering, chilled and frozen food manufacturing
- Gateway Services. Airfreight handling, passenger services, ramp handling, baggage handling, aviation security and aircraft interior cleaning.
- Others.
SATS’s network of ground handling and inflight catering operations spans nearly 40 airports in the Asia Pacific region
Customers of SATS Ltd.:
- Airline
- Hospitality
- Healthcare
- Food
- Education
- Airfreight and logistics industries
- Government
Recommended Read: Dividend stocks I may buy in Singapore.
[/col] [/row] [/section] [section label=”Analysis”] [row label=”1″ style=”collapse” v_align=”middle”] [col span__sm=”12″]DEBT TO EQUITY RATIO
Check for: Less than 0.5 D/E Ratio
Looking at the latest financial report for Year 2021.
SATS have a D/E ratio of 0.565.
This is higher than 0.5 D/E Ratio.
D/E ratio of more than 0.5 will means that the company might be having high level of debt, which means the stock might be over leveraged.
With a D/E of just slightly above 0.5, it barely failed my criteria.
To understand this stock better, I’ve done a quick look at the past Debt to Equity Ratio for SATS:
| SATS Ltd. | |||||
|---|---|---|---|---|---|
| Year | 2017 | 2018 | 2019 | 2020 | 2021 |
| Debt to Equity (D/E) Ratio | 0.068 | 0.065 | 0.058 | 0.386 | 0.565 |
Looking at the past data of SATS, it seems that the D/E ratio only start to raise after the outbreak of the pandemic in 2019 which is reflected by the increase in D/E ratio in year 2020 and 2021.
Knowing SATS’s business is highly depending on the aviation industry, the recent pandemic have impacted SATS’s bottom line greatly.
The reduce in travelling of flights around the world have negatively impacted the company to increase it’s ability to generate higher revenue and income.
Although the company have exceeded the 0.5 D/E ratio, but I think it is temporary.
My Opinion: Fail (Partially)
[/col] [/row] [row label=”2″ style=”collapse” v_align=”middle”] [col span__sm=”12″]Dividend Yield
Check for: More than 2.5% dividend yield
For Year 2021, SATS pay a dividend of SGD 0.00 which is about 0.00% in dividend yield.
SATS did not pay any dividend for the year 2020 and 2021.
0.00% yield is lower than my target of 2.5%.
Looking at the distribution history, the last dividend payment is in year 2019, which is probably due to pandemic.
| SATS | |||||
|---|---|---|---|---|---|
| Year | 2017 | 2018 | 2019 | 2020 | 2021 |
| Dividend (TTM) | SGD0.17 (4.03%) | SGD0.18 (4.27%) | SGD0.19 (4.50%) | SGD0.00 (0.00%) | SGD0.00 (0.00%) |
For dividend stocks, I’ll prefer if they will pay a stable dividend that is growing.
The dividend yield is also much lower than the risk free rate (CPF OA Account) of 2.5%. I will give it a verdict of fail.
My Opinion: Fail
[/col] [/row] [row label=”3″ style=”collapse” v_align=”middle”] [col span__sm=”12″]Dividend Payout Ratio
Check for: Less than 80% dividend payout ratio
At the time of writing, a quick check with some online tools for getting stocks info shows that the dividend payout ratio for SATS is a 0.00% which basically make this section non-applicable.
With a payout ratio of 0%, it means the company retained all earnings if any, and did not payout any dividend for the financial year.
Although SATS did not payout any dividend for 2020 and 2021, it is totally understandable as it’s business is greatly impacted by the pandemic.
It will be wise for the management to keep enough cash to weather the storm.
Although SATS might be a good dividend stock in the future, SATS fail this section at the time of writing.
My Opinion: Fail
[/col] [/row] [row label=”4″ style=”collapse” v_align=”middle”] [col span__sm=”12″]EPS Growth Rate
Check for: More than 10% EPS Growth
Earning Per Share (EPS) helps to analyze the profitability and quality of a stock.
Here, we will like to see an EPS growth of 5 years or more.
Quick check on the 2021 financials.
The EPS 5 year growth rate is “Blank”!
There is no Earning Per Share (EPS) for SATS in 2021!
When there is no EPS growth rate, it means the company is not earning for the current financial year.
| SATS | |||||
|---|---|---|---|---|---|
| Year | 2017 | 2018 | 2019 | 2020 | 2021 |
| EPS | SGD0.22 | SGD0.22 | SGD0.23 | SGD0.16 | -SGD0.02 |
The cause of having a negative EPS for 2021 is probably due to the pandemic.
Even so, I may not want to invest in a company that is not earning money.
My Opinion: Fail
[/col] [/row] [row label=”5″ style=”collapse” v_align=”middle”] [col span__sm=”12″]High Return Of Equity (ROE)
Check for: More than 10% ROE
ROE is one of the most important ratio used by Warren Buffett.
Return of Equity is used to measure the management’s ability to make a return on our investment.
At the time of writing, the ROE of SATS have an ROE of -5.0%.
A deep dive into the history of SATS shows it usually have an ROE of >10% until 2021, where it have a ROE of -5%.
| SATS | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|
| Return on Equity (ROE) | 16.2% | 15.1% | 10.3% |
-5.0% |
SATS’s historical ROE have been pretty good and is usually above 10%. But as the pandemic arise, it have reduced it’s ROE to -5% thus it is reflected in 2021’s financial data.
Although SATS may have great future potential as a good dividend stocks, a ROE of around -5.0% means that it is losing shareholder’s equity at 5.0% per year.
My Opinion: Fail
[/col] [/row] [row label=”6″ style=”collapse” v_align=”middle”] [col span__sm=”12″]PRICE-TO-BOOK RATIO
Check for: P/B Ratio of less than 1.8
SATS is probably most investor’s favorite dividend stock. SATS provide almost all service for Changi airport and all airline that comes through Changi airport.
With so much attention on SATS, the price of the stock will most likely be traded above it’s valuation (book value).
At the time of writing, the current P/B ratio of SATS is 3.012.
Meaning, it is trading at 3 times its book value.
My Opinion: Fail
[/col] [/row] [row label=”7″ style=”collapse” v_align=”middle”] [col span__sm=”12″]MOAT
Check for: Not just having a MOAT, but a great MOAT
SATS is probably the most important company that provides almost all the services for Singapore’s Changi Airport which is know for it’s world class service and experience.
Similar to SIA Engineering which is the main service provider for aircraft servicing in Singapore Changi Airport, SATS provides services that are mainly customer facing and food oriented.
SATS is currently the Asia’s leading provider of food solutions and gateway services which helps to delight customers with innovative food solutions and seamless connections.
SATS’s Top 10 Competitors
- Servair Air (Food Distributors industry)
- Gate Group (Food Processing industry)
- LSG Sky Chefs (Baked Goods, Frozen & Prepared Foods industry)
- Gate Gourmet
- Flying Food Group
- New Rest Group
- SCK Sky catering Kitchen
- INFL
- DNATA
- Hawaiian Airlines
With it’s base in Singapore, SATS serve over 55 locations in 14 countries.
SATS has been described as the third most-admired company in Singapore, second for the quality of its services and for corporate reputation, and placed fourth for innovation.
According to Phil’s book Rule#1 investing, SATS have a strong ” Toll Bridge MOAT” and a “Brand MOAT”.
Toll Bridge MOAT is probably the best and most important MOAT of SATS. Toll bridge moat prevent competitors from coming into the picture, allowing SATS to have most of the business that comes through Singapore Changi Airport.
Brand MOAT can be an attractive MOAT. Providing safe food solutions and world class gateway services is probably what SATS’s brand moat stands for.
With Singapore Changi Airport as it’s backer and support from the Singapore’s government.
In my opinion, SATS’s MOAT is pretty strong.
My Opinion: Pass (Great!)
[/col] [/row] [/section] [section label=”3. Conclusion” padding=”10px”] [row style=”collapse”] [col span__sm=”12″ align=”left”]Overall
SATS have a final score of 3/10.
In year 2021, SATS have no earning thus no EPS growth rate, no dividend payout, and a negative ROE.
These unfavorable financial results occurs only after 2019’s pandemic which will means it might be temporary.
Having said that, SATS have an unbeatable MOAT which will probably help the company to recover when the aviation industry recovers.
Nonetheless, I don’t think I will want to invest in this yet as I personally think the pandemic will continue impacting the company for the near foreseeable future.
Below is how I’ve scored SATS.
| My SATS’s Score Card as a Dividend Stock | ||
|---|---|---|
| Metrics | Weightage | Score |
| Debt to Equity Ratio | High (2) | 1 |
| Dividend Yield | Low (1) | 0 |
| Dividend payout ratio | Low (1) | 0 |
| EPS Growth Rate | Low (1) | 0 |
| High Return of Equity (ROE) | Low (1) | 0 |
| Acceptable Price-to-Book Ratio | High (2) | 0 |
| MOAT | High (2) | 2 |
| Total | 3 | |
Why do I find some metrics more important than others?
There are 3 attributes in a company that Warren Buffett wants in particular:
- Wonderful Company at Fair Price
- Stable & Understandable Business
- Vigilant Leadership on Risk Management
This translate to the following 3 metrics I have in my list:
Thus, for these metrics, I will put a higher weightage in my scoring.
[/col] [col span__sm=”12″ align=”left”]Question.
Would you invest in this now?
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