Eutelsat bounces back

The stock market is again backing satellite operator Eutelsat. Following on from its October 29th quarterly results Eutelsat’s share price has rocketed by almost €1, and this follows some months of flat or even declining trading. October 31st saw Eutelsat’s price hit €23.20, a vast improvement on August 2nd when its price was just €21.34.

The uplift has come about because of generally favourable broker comments. HSBC, for example, in a ‘flash’ note to clients gave Eutelsat a target price of €26, and highlighted Eutelsat’s maintained guidance for the full financial year, and in particular that the guidance was being maintained even ahead of building in a half-year’s trading revenues and profits from the acquisition of SatMex which will likely kick-in at the beginning of 2014 once the acquisition closes. “The company remains on track to see acceleration in growth in coming years. Moreover, the stock currently looks cheap in our view,” said Oliver Morel, an analyst at HSBC.

It was a similar story at brokers Nomura, which headlined its note as “A bit better, but not yet out of the woods”. Nevertheless, Nomura issued a ‘BUY’ advice to clients, saying “we were somewhat encouraged by the performance this quarter.”

Indeed, Nomura – as with other industry observers – recognised the 42.4 per cent improvement in ‘value added services” which included Eutelsat’s expensive Ka-Sat high-throughput broadband satellite and that it now had 17,000 net broadband additions during the quarter and a total of 108,000 subscribers.

Nomura praised Eutelsat’s new approach to reporting utilisation, normally only declared at the half-year and end-year periods. “Utilisation is typically only reported half yearly so we applaud management’s decision to start disclosing this data on a quarterly basis. Utilisation stood at 75.2 per cent at the end of Sept, up from 74 per cent at the end of June. This translates to a total of 646 transponders being leased at the end of Q1, an increase of 11 transponders compared to June and largely driven by the redeployment of Eutelsat’s 8 West C satellite”.

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