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SES 2016 numbers “at risk”

Satellite operator SES is not due to publish its Q3 trading update until October 28th, but for one analyst there are concerns for this year’s numbers and guidance. Giles Thorne, equity analyst at investment bank Jefferies, suggests in his note to clients on October 12th that the SES guidance for this year now looks “at risk” and not helped by delayed satellite launches, and to a certain extent confused by this year’s “inorganic” expansion (including the acquisition of RR Media in July and the consolidation of O3b, which wrapped in August).

Thorne says: “It’s hard to know exactly where expectations lie given consensus is now skewed by analysts gradually updating forecasts for the RR Media / O3b acquisitions. The company doesn’t distribute its full year aggregated consensus. While the granularity isn’t there, our sense is that consensus sits at the bottom end of the range for FY16 too.”

However, he suggests that despite the prospects of 2016’s guidance being “a stretch” to achieve, “we acknowledge it’s not impossible for the company to hit the low end. There are two known contract wins that contribute incrementally to 4Q16 (the SES / O3b win with Centcom and the Trojan win with the US Army).”

Thorne says SES might just “fudge it” and adds: “In spite of the evident pressures, a downgrade is not a certainty in our view. Management have only one more quarter of ‘carrying’ the 2016 guidance, a guidance based on an irrelevant perimeter since RR Media and O3b were acquired. There is a chance that the management voice-over will acknowledge the challenges, point to the potential Q4 ’16 increments and leave the guidance unchanged. By the time it’s “not delivered” at the Q4 ’16 results in February, we would have all moved on to the 2017 outlook, and a return to standalone growth.”

Jefferies still rates SES a “BUY”, and with a target share price of €27.50 (currently around €20.70).

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