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Longest day, shortest night for SES

June 20, 2016

On June 21st, satellite operator SES is holding its ‘capital market day’ and in the process attempting to explain recent events as to its miserable share performance, and how it hopes to restore investor confidence.  SES’ share price has tumbled 37.58 per cent over the past year, and is now trading at a mere €19.25.

Equity analysts at investment bank Berenberg, in a note for investors on June 20th, posed a list of questions that analysts will be seeking answers to on June 21st.  Berenberg says they expect SES to return to organic growth from Q3/2016 “but the market needs convincing”.

The underlying worry is explained by Berenberg. “Following the warnings from SES and Eutelsat in the last year, the market now doubts whether these companies are as predictable as investors had previously thought. The magnitude of the Eutelsat warning, in particular, raises doubts about the visibility that these infrastructure companies actually have. What risk is there to guidance for FY 2016, and what do we know about 2017?”

“SES management needs to set out clearly which parts of the business are at risk (point to point) and what is in fact insulated from these competitive pressures,” asks Berenberg.

Investors need a return on their investment, of course, and one of their worries is whether this year’s dividend from SES could be affected. The past few years have seen SES increase its dividend pay-out by an extra 10 per cent annually.

The bank’s note also questions the decision to acquire the O3b satellite constellation: “Investors want to know why SES decided to exercise the option to take control of O3b so early. Why did it not do the deal all in one go (move straight to control), and why do it now when it required equity to be issued when the shares were at a particularly depressed level? What are the synergies that can be realised between SES and O3b and on what timeframe?”

Berenberg is still recommending “BUY” advice, and a target value of €32.

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