UOB Kay Hian cuts Sats target price to S$2.89, downgrades it to ‘hold’ on likely tariff impact

[SINGAPORE] Freight handler Sats might be hit by a potential slowdown in globalisation and decline in global trade volume as a result of the United States’ reciprocal tariffs, prompting one research house to slash its target price and downgrade the stock to “hold”.

UOB Kay Hian on Wednesday (Apr 9) lowered the target price of the Singapore mainboard-listed air freight handler and inflight caterer to S$2.89 from S$4 as it tentatively cut its FY2026-2027 air cargo volume projections for Sats by 5 per cent, and reduced its earnings projections by 17 to 18 per cent.

Analyst Roy Chen said Sats derives 50 per cent of its group revenue from its global air cargo handling business, with the United States being its top market accounting for 25 per cent of group revenue.

“The outburst of the tariff war has rendered all previous forecasts for global trade and cargo volume by different global institutions and industry consultants obsolete. The situation is still developing, and it is very difficult to quantitatively assess the full impact of the tariff war at this juncture,” he wrote.

He noted Sats has downside risks that stem from the tariff war, on top of the US withdrawal of tax exemption from May 2 for low-value imports of US$800 or less from mainland China and Hong Kong.

With US President Donald Trump’s commitment to shift production to the US, UOB Kay Hian’s base case is that even with successful negotiations with some trade partners, the net outcome would be a lower level of global trade volume than before the tariff war.

The updated earnings forecasts for Sats now stand at S$240 million for FY2025, S$226 million for FY2026 and S$256 million for FY2027. The year-on-year dip in the FY2026 earnings forecast reflects UOB Kay Hian’s projected drop in Sats’ global air cargo handling volume amid the tariff war.

The analyst said: “In view of the escalating trade war and possibly a prolonged uncertain period for global trade, we downgrade Sats to ‘hold’.

“While we believe air cargo transportation remains a key means for global trade flow, and we like Sats for its global market leadership and strong competitive advantages against peers, it is hard to be bullish on Sats at this juncture, given the significant uncertainties for global trade in the medium term.”

But analysts from another brokerage, CGS International, said in an Apr 4 report that they expect Sats’ profitability to be partially mitigated in the event that low-value Chinese imports into the US will be subject to duty.

They noted that there is a lack of readily available similarly affordable substitutes for imported goods such as fast fashion products for the US consumers, and therefore the consumers will absorb the duty to be imposed.

Jason Sum, DBS analyst, said Sats could be hit as a result of lower trade and dampened consumer confidence but the impact might be cushioned if consumers divert spending to air travel from goods.

He anticipates a decline of at least 1 to 3 per cent in global trade volumes over the next year, based on the tariff situation now. “Air cargo typically responds more acutely to shifts in demand, so we anticipate a steeper decline in global air cargo volumes,” he noted.

An economic slowdown as a result of trade war is likely to dent consumer confidence and weigh on air travel demand.

Sats’ ground handling and flight catering operations could be negatively affected by these factors, although changing consumer preferences to spending more on experiences may lend some resilience to air travel, said Sum.

Sats’ shares were down 7.2 per cent to S$2.46 at market close on Wednesday, less than 2 per cent from its 52-week low of S$2.42.