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Satellite: Optimistic growth prospects for 2017-18

The number-crunchers have spoken. A series of bank notes to investing clients following on from the ‘Big Three’ (SES, Intelsat and Eutelsat) and their latest suite of results issued on October 27 and 28th.  However, the comments are extremely mixed.

For example, equity analysts were unanimous that last year’s reduction in US governmental and military demand had now been reversed, and that growth in capacity demand was now the order of the day. This news benefits each of the trio of operators.

Berenberg Bank, in its ‘On the Turn’ report, said that despite SES lowering its guidance – which normally would have investors fleeing – in fact “the underlying picture confirms our view that SES is turning the corner in its two “problem” segments, and that the overall business is poised to return to low growth in Q4, with a greater acceleration seen on a sequential basis, which is also an important indicator.”

In particular, Berenberg cites the planned SES-17 satellite which will supply bandwidth to Thales Alenia for its FlytLIVE in-flight entertainment service, and which SES expects to be delivering €100 million annually by 2024. The satellite is scheduled for launch in 2020. The news helps Berenberg issue a ‘BUY’ rating and a price target of €32.

It is a similar position at Deutsche Bank, which described recent events for the Big Three as “the most acute pain”, and says that as far as SES is concerned, SES has now passed its “crunch point”, but warns that for Eutelsat they still must go through a period of pain for the next 24 months.  Deutsche Bank advises investors to ‘BUY’ SES because of anticipated growth which will come by 2017.  But Eutelsat “has more of the bad [to come] and none of the good”. The bank tells clients to ‘SELL’ Eutelsat.

Investment bank Jefferies praised all three operators for their “upbeat results” and how the three had steered their ships through the rough waters of 2016, and says (of SES) that the recent slump in their share price had been overdone. One point highlighted SES’s success in winning Ultra-HD contracts and its opinion that UHD would have similar penetration rate to that of today’s HDTV.

Morgan Stanley focused on Eutelsat and addressed how Eutelsat would address “significant” cost-cutting plans over the next few quarters and which it would specify in detail next February.

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