With the rebound in air travel, investors may be wondering what’s the best local stock that can leverage this tailwind.
You would be tempted to focus on Singapore Airlines (SGX: C6L), but what about SIA’s partners, SATS Limited (SGX: S58) and SIA Engineering (SGX: S59)?
Let’s pit SATS against SIA Engineering head-on.
SATS Ltd (SGX: S58) – Recovery takes flight
With its stock price range bound between late 2022 and April 2025, SATS may be finally ready to take flight.
For those unfamiliar with its business, SATS is recognised as one of the world’s largest providers of air cargo and handling services as well as being Asia’s leading airline caterer.
Simply said, the company provides aviation handling services for both cargo and passengers (Gateway Services).
Additionally, it also provides food catering (Food Solutions) for both air and on the ground.
For its second quarter of the fiscal year ending 31 March 2026 (2QFY26), revenue rose 8.4% year-on-year (YoY) to S$1.57 billion, driven by volume growth across both cargo and aviation meals.
Encouragingly, profit after tax (PATMI) increased faster, up 13.3% YoY to S$78.9 million.
More importantly, operating cash flow (after lease) and free cash flow turned positive, coming in at S$77.2 million and S$3.4 million, respectively.
SATS’s latest results is another validation of its continued recovery post-pandemic, after its net earnings swung from losses in FY23 to a profit of S$244 million for FY2025.
Meanwhile, the company has been integrating its WFS (Worldwide Flight Services) acquisition nicely, expanding the company’s global reach to cover 225 stations in 27 countries.
In fact, 50% of global air cargo volume flows through these routes.
Moving forward, SATS’s growth will come from handling higher cargo volume and through its ability to cross-sell its Food Solutions to the WFS network in Europe and the US.
Recently, it inked a new three-year deal to provide in-flight food for Turkish Airlines.
The main risks for the name include the debt it took to complete the WFS deal, possible challenges in integrating WFS, and a general economic slowdown, which would derail the recovery in air travel.
SIA Engineering (SGX: S59) – A Steady MRO Compounder
Formed from the Singapore Airlines engineering division, SIAEC’s core business operates in the MRO space (maintenance, repair and overhaul).
In its first half of the fiscal year ending 31 March 2026 (1H FY25/26), SIAEC’s turnover increased 26.5% YoY to S$729 million, with profit after tax up by over 21% to S$83.3 million.
The company grew more profitable, with its operating margin increasing to 1.8%, up from 1H FY24/25’s margin of 0.6%.
Continuing its strategic initiatives to ink joint ventures with global airlines and Original Equipment Manufacturers (OEMs), SIAEC recently broadened its relationship with Safran Aircraft Engines to expand the provision of its MRO services.
The company’s future growth depends on the continued rebound in air travel, which would drive greater demand for SIAEC’s MRO services.
Main risks for SIAEC include competition from other MRO providers in the region and its reliance on the SIA group for revenue.
Head-to-Head Comparison
So how do these names match up against one another?
On one hand, SATS’s revenue growth potential is global (after its WFS acquisition), with the company looking to capture higher volume in aviation services as well as catering food solutions.
This factor makes SAT’s growth potential rather tantalising.
On the other hand, SIAEC’s revenue will be more reliant on steady MRO demand, with a focus on the surrounding Asian region.
Looking at their balance sheets, SATs stands out with its leverage, with a debt-to-equity (D/E) ratio of 1.4 times for the last 12 months (LTM), and total borrowings amounting to S$2.45 billion.
In that time period, SIAEC had a D/E ratio of just 0.05 times with a low debt level of only S$4.9 million.
SIAEC has a better dividend history, having only missed two annual dividend payments over the past six years, while SATS skipped three annual dividend payments over the same period.
Both companies’ dividends are sustainable, with the payout ratio for SIAEC coming in at 69% and around 32% for SATS over the LTM.
While both companies are cyclical in nature, SIAEC’s business of MRO services should be more resilient than SATs, given that airplanes still have to be maintained even when there are fewer flights.
Get Smart: Which Is the Better Buy?
So, which company is a better buy?
It comes down to what you value as an investor: if you’re someone who prefers something with higher growth potential, SATs may be the better choice for you.
However, you have to be mindful of higher execution risks (integrating its WFS acquisition).
For someone who prefers a stable compounder, SIAEC, with its better balance sheet, steadier dividends and cash flows, could be the better fit.
However, these positives come at the expense of slower growth.
We’ve found 5 SGX-listed dividend stocks with strong track records in turbulent markets. If you want consistency in an uncertain world, start here.
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Disclosure: Wilson H. does not own shares in any of the companies mentioned.
