Last week saw Romain Bausch attend his final Board meeting as CEO at SES after some 19 years in the hot seat. He will remain on the company’s BoD but his departure prompted Berenberg Bank’s team to take a close look at what Sarah Simon described as a “new beginning” for the company.
Simon admits that a change of CEO after this length of time is “no small matter”, although adds “ultimately we do not envisage a major deviation from the current strategy and financial plan. The business of satellites, which have a lifetime of over 15 years, is necessarily long-term in nature, and, in this respect, we do not expect any near-term changes in strategic or financial direction. Moreover, we note continuity in the form of CFO Padraig McCarthy, who joined SES in 1995, CTO Martin Halliwell (1987), CCO Ferd Kayser (2002) and CDO Gerson Souto (1998).”
Consequently, she asks what new man Karim Michel Sabbagh’s appointment as CEO will mean for SES? She reminds clients that Sabbagh has been on the Board since 2011, and that Sabbagh is part of the overall continuity plan.
“Indeed, just as global diversification was a key feature of Mr Bausch’s tenure – when he joined, SES was purely European, today 50 per cent of its revenues are US/emerging markets – in future SES will continue to expand its emerging market business. The vast majority of incremental revenues will come from Asia and Latin America, markets where SES is already well positioned with orbital slot availability to fuel further expansion,” she adds.
“Likewise under Mr Sabbagh, there will be further advances in technology: the commercial introduction of all-electric satellites, combined with advances in launch services, will lead to a further meaningful reduction in the cost of a satellite programme, which, over the last 15 years have contributed to a c65 per cent decline in the average cost per transponder year. This will further boost returns.”
Berenberg’s bottom line remains positive. “Key decisions that will, at least in part, define the success of Mr Sabbagh’s appointment, will relate to O3b (will SES acquire more of the innovative start-up? And how big could it become?), acquisitions (will SES find Asian assets at reasonable prices?), and cash return (how much, and how soon?). We reiterate our Buy rating and our DCF and multiples-based price target. SES offers a rare combination of top-line and free cash flow growth, and has the potential to return up to a third of its market cap to shareholders.”
Her comments came ahead of the news that Bausch would be appointed to Chair the SES Board at the end of this year when current Chair Rene Steichen steps aside.
The bank’s price target of €29. SES’s price on April 3rd was a top-lining €27 and only a few cents below its 52-week high (of €27.52).