SATS 1st quarter results

21 July 2018

Dear Fellow Investor,

On Friday, SATS one of our core PGWA holdings released its 1^st Quarter results.

Yesterday evening, SATS (SGX: S58) released its first quarter earnings for its fiscal year ending 31 March 2019 (FY18/19).

State Of The Business Now

Here’s a look at some of the important financial numbers for the first quarter:

• Revenue came in at S$439.4 million, up 3.0% from a year ago.
• Share of results of associates and joint-ventures (net of tax) was S$15.3 million, down 1.3% year-on-year.
• Profit attributable to shareholders grew by 11.5% to S$63.9 million.
• Similarly, diluted earnings per share was up 11.8% year-on-year to 5.7 cents.
• Operating cash flow rose 96.1% from S$46.6 million in the first quarter of FY17/18 to S$91.4 million. There was only a slight increase in capital expenditure from S$18.9 million to S$19.1 million, and as a result SATS’s free cash flow jumped significantly from S$27.7 million a year ago to S$72.3 million.  
• As of 30 June 2018, SATS had S$439.7 million in cash and equivalents and S$106.5 million in total borrowings.

The only disappointment was the termination of the Turkish airline catering deal as it could not resolve the bureaucratic issues with the Turkish aviation authority. The financial impact was minimal but the potential growth opportunity is lost. As in every business mistakes are made but the ability to cut and minimize losses and move on is the recipe for ultimate success.

On a positive note, there are several promising growth opportunities in the pipeline including  a second joint venture with Wilmar, Marina Bay Sands cruse liner catering franchise  and expansion with Air Asia into India.

CEO Alex Hungate during the earnings presentation commentated on the trade war impact on the aviation industry. Bottom line he thinks passenger and freight volumes will continue to grow regardless of how the trade war progresses.

On Friday SATS closed up 7 cents to SGD 5.17, reflecting the positive results.  

There are signs of recovery in the KLSE.  Last week there was positive foreign fund inflow  into  banking shares and other oversold blue chips. Support is building at current levels.

Consumer spending is picking up. Last week we visited a KLSE listed  finance company specializing in making small loans.  The CEO was very positive moving forward with the change of government. When I asked him about the new government and how it would impact his business his face lit up showing his optimism. 

Optimism is spreading in Malaysia just like a virus.

Invest well and grow your wealth
Bill

Today’s critter is a wombat from the Perth Zoo.

The wombat is a furry animal with short legs that resembles a small bear. We plan a visit to Perth perhaps in October and hope to get some nice animal photos to share with you our newsletter readers.