SATS' Tokyo operation badgered by headwinds

TFK is suffering from an overcapacity of caterers.

The rocky operation of TFK Corporation in Japan will continue to put pressure on SATS.

According to OCBC Investment Research analyst Eugene Chua, TFK continues to face headwinds in Tokyo airports due to overcapacity of caterers. More so, the volume may remain weak as long as its customers do not reinstate the flights they cut in the first quarter of the year.

Meanwhile, with Changi Airport still recording healthy growth across passenger, aircraft and cargo traffic, Chua noted that SATS gateway services revenue will continue to grow, despite the headwinds faced by TFK.

"All said, we continue to expect near-term revenue growth to moderate and believe SATS’ strategy of diversifying out of Singapore through partnerships and/or M&A activities will help drive longer-term growth," the analyst said.

To recall, the group’s revenue grew slightly by 0.5% YoY to $426.5m, mainly attributable to growth in Gateway Services but offset by weak food solutions, which was impacted by weaker operations in Japan due to cut back in flights by some customers of its Japan’s subsidiary, TFK

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