Last week’s Q1 results from satellite operator SES were encouraging and more or less on the nose in terms of expectations, but there’s a huge caveat. New CEO Steve Collar has only been in the job 22 days and is now conducting an internal review of all his divisions and departments. Previous CEO Karim Michel Sabbagh stepped down a month ago.
The risk, according to equity analysts at investment bank Jefferies, is that in three months Collar will come back and deliver a downgrade of this year’s overall expectations.
As far as the April 27th numbers were concerned, the market loved Collar’s presentation and commentary, and the operator’s share price rocketed by €1.36 (11.6 per cent) to €13 and well above the company’s more typical recent €12 levels. Indeed, Jefferies gave SES a ‘target price’ of €24.55, which would certainly be encouraging for long-term investors.
As to other highlights from the call with analysts, it emerged that RTL is the first commercial FTA broadcaster in Germany to pursue UHD [starting with the Formula 1 race from Baku on April 28th], but SES is working on plans to launch others before the end of the year; SES has seen some anticipated growth in the International segment fail to yet materialise (for reasons to do with certain start-up TV ventures failing) but remains confident on the ramp of SES-9 and SES-10; SES has secured important renewals (capacity extension with Viacom at 19 / 28 degrees; UHD for Canal+ in France – Canal+ “proactively pushing” satellite given it is only distribution with “quality guarantee”), according to Jefferies.
Berenberg Bank was also enthusiastic, saying that SES had started the year on a positive note. “Given that, in the last couple of years, it has endured a constant series of downgrades, this was a much hoped for ray of sunshine for SES shareholders. This being said, management was clear that we should not become overexcited by these numbers and that challenges remain. The key to the performance of SES shares for the next 12 months will be executing on its plan to return the business to growth. We clearly are not there yet, but there are grounds for cautious optimism.”
Deutsche Bank was much more circumspect, with analyst Laurie Davison stating candidly that he was no fan of satellite operators, even at their current low valuations. “But we see SES as far less exposed than Eutelsat. SES deserved Friday’s [rise in value] on 1Q results and we close our short term trade of SELL Eutelsat against SES.
Other comments came from Eric Beaudet, an equity analyst from Nataxis Securities, who recognised a positive message from SES, and confirmation that the operator should return to growth later this year. “But although results are slightly ahead of consensus, management did manage expectations, underlying that new announced contracts were already included in the guidance, that some restructuring costs was pushed out from Q1 to Q2, and that C-band monetisation is not a priority.”