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Over the next week or two, the giant satellite operators will unveil their latest numbers. The problem is that all their earlier expectations assumed that launch rockets from SpaceX and Proton could be depended on to meet contracted launch dates. That assumption is now in tatters, and is affecting the revenue pictures for SES and Eutelsat.
Investment banker Jefferies has taken the opportunity to take a snapshot look at what’s likely in store for the three main satellite operators
SES is first up with results on July 24th. The bank’s note says: “The 2015 guidance is likely to be reiterated, with the well-signalled lease of 8 transponders on Astra 2G to Eutelsat (also part of the 28 degrees east settlement) further contributing to an improvement in y-o-y growth trends (with easier comparatives) in 2H15 that will get the group back into growth for the full year (though we are likely to see several questions attempting to flesh out this inflection much further).”
“The three-year guidance, however, is likely to have to be brought down following the SpaceX launch failure on 28 June (the details of which are provided below). No single commercial operator has backed SpaceX more than SES, and this is reflected in the number of upcoming launches SES has with SpaceX [5 on SpaceX between now and December 2017],” says the bank.
Eutelsat’s numbers follow on July 30th (for its trading year to June 30th). Jefferies says to expect Eutelsat to stick to its guidance: “[Eutelsat] management usually uses the Q4 results to update current year and three year guidance. We expect the current average revenue growth guidance of >5 per cent in each of FY16 and FY17 to remain unchanged, though we must consider the impact of the recent Proton and SpaceX failures.”
“We are likely to be given growth guidance for FY18 for the first time: our forecasts are for growth of +3.7 per cent, which is not completely inconsistent with the current fleet deployment which puts 27 transponders of expansion capacity up in calendar 1H17 (Eutelsat 172B), equal to 3.4 per cent of the current leased fleet and ready to contribute in FY18. On that basis we expect new FY18 growth guidance of >3 per cent. We expect the current FY15-17 EBITDA margin guidance of >76.5 per cent to remain unchanged (but become FY16-18 guidance). We expect current leverage guidance (3.3x) and pay-out ratio (65-75 per cent) to also remain unchanged. Perhaps the most interesting number to look out for is the new capex guidance: Eutelsat guides for an average capex over a three year period, we will therefore now roll into FY18 where we expect some capex normalisation to occur, bringing the overall number (currently, €500 million average over FY15-17) down. We forecast €430 million in FY18, for a three year average of ~€480 million.”
Intelsat is expected to deliver its numbers during the week on July 27th, and Jefferies pulls no punches declaring the business to be an “unpopular equity with limited investor confidence” and suggests there will not be a significant change to management’s guidance. “That being said,” says the bank’s note, “the Q2 2015 results are likely to end any hopes that the better than expected Q1 2015 performance could translate into a guidance upgrade in time. Our Q2 2015 revenue forecast of $583.6 million implies growth of -5.2 per cent yoy (from -4.2 per cent / -3.7 per cent in Q1 2015 / 4 2014) and takes the YTD growth to – 4.7 per cent, bang in-line with guidance growth (at the mid-point) of -4.7 per cent. Our Q2 2015 EBITDA forecast of $454.7 million implies an EBITDA margin of 77.9 per cent, also in the mid-point of the guidance range.”