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Buoyant forecasts for Eutelsat

Satellite operator Eutelsat has enjoyed a good few days in terms of its share price and helped by a very positive pair of reports from investment banks. One report, from equity analysts at Exane/BNP-Paribas, comes with a “BUY” recommendation and a target share price up 22 per cent at €35 a share (and already rising from €26.50 to €29 this week).

Eutelsat releases its half-year numbers (to December 31st) on February 17th and Exane is expecting a positive story, saying that it expects an acceleration in overall group revenue trends.

“Our positive fundamental case,” says analyst Sami Kassab, “is that over the coming months it will become increasingly clear that the accelerating growth in Video revenues will more than offset any weakness in Data (revenues) and lead to either consensus upgrades or, at the very least, a greater belief that Eutelsat’s organic revenue growth can accelerate towards 4 per cent in FFY 16/17 – this is crucial as, since 2006, the major driver of the stock has been the market’s belief in organic revenue growth. The stock has performed well over the last month with +8 per cent outperformance – we think this is not only justified but we see more outperformance ahead & note that the stock is still one of the worst large cap Media stocks over last 12 months with -2 per cent underperformance.”

But Exane is not alone. Giles Thorne, equity analyst at investment banker Jefferies, even though favouring Eutelsat’s rival SES as its “preferred stock”, remains favourably disposed towards Eutelsat saying that two successful recent additions to its satellite fleet should report better numbers on February 17th.

Thorne’s rationale is that Eutelsat 115 West B (41 Ku-band and 24 C-band of transponder expansion) which entered commercial service from 1 October and Eutelsat 8 West B (a smaller expansion payload of 6 Ku-band and 20 C-band transponders) which started on 5 October; should guarantee extra revenues. But he also adds a word of caution, saying that there could be further bad news in the form of Eutelsat’s Government services revenues (mostly in the shape of US government/military contracts).

Also on the potential upside is the launch on January 29th/30th of Eutelsat 9B, which should  help generate revenues once it is on station (towards the end of February, and once in-orbit testing is completed).

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