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SES: “Eyes down, look beyond the top line”

Satellite operator SES is not having the best of years, if you just look at their top line revenue prospects. But dig a little deeper, and according to a detailed report from investment bank Berenberg, and investors will find plenty to be enthusiastic about.

The period Q4/2014 to the end of 2014 was good for SES, but this year has been and looks like being much more muted, says the bank. Indeed, this year will be a period of “very low growth” says Berenberg’s analyst Sarah Simon, and not helped by the delayed launch of SES-9 which is now not likely to get lofted towards orbit until Q3/2015. This satellite, destined to serve Asia, already has excellent pre-sales, but because it is an all-electric satellite it will take 4-6 months to get into orbit – and only then will it start earning its keep.

 The upside good  news is that once in orbit the satellite is good for around 18 or so years, and much better than the usual 15 years of a ‘conventional’ chemically-fuelled craft.

 However, there’s another benefit for SES, suggests the bank’s report. Quietly, and without much fanfare, SES has truly tapped into the benefits and appeals of all-electric satellites and lower cost SpaceX launches into orbit. Berenberg says that they had calculated that these savings were worth about a 20 per cent reduction in SES’ Capital Expenditure.

That’s good, but the bank has looked again at its own forecasts and now suggests that the savings could be much better than 20 percent, and forecasts that capex per transponder per year could tumble to more than 40 percent lower. This is a very tangible savings plan, which when combined with the launch of SES-9 should mean a major recovery in revenues and profits for 2016 for SES.

Indeed, such is Berenberg’s optimism that the bank is significantly raising its ‘BUY’ target price for SES’ share price, from today’s €32.30, to $37.60.  SES sh

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