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Satellite results season: ‘gloomy’

This week is the start of the ‘Big Three’ results season. October 27th sees Intelsat and Eutelsat numbers unveiled, while on October 28th SES reveals its latest quarterly results.

The news on each of the three is not exactly glowing. Intelsat, despite some financial restructuring is still heavily burdened by debt, and there is some continued anxiety over how well Intelsat is managing an over-excess of capacity, especially on its African transponders.  Intelsat’s share price has languished in the $2.50-$3 price range for the past 5 months, although this is a significant improvement on its March 1st price of a miserable $1.50 per share.

Eutelsat’s share price is down (y-o-y) a worrying 42 per cent to €17.70 on October 24th.

The position at SES has also suffered, with its share price having fallen from €26 back in April to a lowly €19.47 on October 24th. Indeed, in a report to clients on the same day, investment bank Exane/BNP-Paribas analyst Sami Kassab stated that he saw “SES guidance being at risk” for its Q3 and full year results.

“First, we see the risk that SES revises its FY16 guidance down when it reports Q3 results next Friday. We believe that greater than expected pressure in Enterprise coupled to ongoing headwinds in US government is unlikely to be offset by modest growth in Video and double digit gains in Mobility. In addition, the likely delay in the Entry into Service of SES 10 is likely to put additional pressure on H2 revenues. Our quarterly forecasts are broadly in line with consensus. SES trades on a PE17x of 19x despite 2 consecutive years of organic revenue decline. We reaffirm our Underperform ahead of the Q3 16 release.”

“With regards to Eutelsat,” says Kassab, “We expect pricing pressure in Data, headwinds in Government and a decline in consumer broadband subscriber numbers to drive a 4% organic revenue decline in Q1 with revenues of €365m. However, we still believe that newsflow could continue to improve as we expect management to strike a positive tone on recent contract renewals in Government and to argue that its target of stable divisional revenue growth could prove conservative. We also expect management to confirm that it is on track to deliver if not over-deliver on its capex reduction plans for FY17. However, we also believe that a restructuring plan could be on the card. Overall, we remain Neutral but given recent share price weakness, we have a preference for ETL over SES going into earnings season.”

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