SES expectations trimmed; Eutelsat more positive

On July 28th, both of Europe’s major satellite operators unveil their results. SES will reveal its half-year numbers and Eutelsat its full-year figures. The event has prompted equity analyst Sami Kassab at Exane/BNP-Paribas to examine the prospects for the two companies.

Kassab makes it clear that he currently favours Eutelsat over SES. He says: “We see scope for a positive surprise at ETL but fear guidance could be at risk at SES.” Kassab adds that Eutelsat’s previous expectations of a 2 per cent revenue decline will be confirmed but on the upside that the operator’s cost-saving plan is now “delivering strongly”.

“We expect Eutelsat management to reaffirm its outlook of ‘broadly flat’ revenues for FY18 and a return to growth thereafter. Given the solid progress on cost savings, we believe there is scope for a solid EBITDA margin outlook in FY18,” says the bank.

However, the prospects for SES has the bank saying that its “outlook is under pressure” and is expected to show a 3 per cent organic decline in its important Video division (and not helped by “compression headwinds”).

There is some upside for SES, says Kassab, and helped that over the last 12-18 months SES has allocated capital into some major diversifications, notably buying O3b and RR Media (which it rolled into its MX1 division).  “While SES has guided to a return to revenue growth, operating margin expansion and ROCE improvement, it still has to demonstrate its claims that it can return to sustainable revenue growth in an increasingly competitive industry. We doubt the proof will come in Q2 17,” he adds.

Consequently, he now rates SES in advice to investors as ‘Underperform’. “We have cut our EPS17e and EPS18e forecast by respectively 6 per cent and 5 per cent reflecting a combination of forex movements, AMC 9 failure, lower D&A and net financial results and taxes. Our underlying revenue and EBITDA are 1 per cent lower reflecting a greater-than-expected negative impact from the loss of AMC9 (15 million vs. 7 million previously).”

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