Eutelsat held a meeting and presentation in London on February 18th as part of their ‘road show’ series of post-result discussions. The meeting generated a more positive outlook for the satellite operator, and perhaps needed given that Eutelsat’s organic revenue decline was the worst for the past 10 quarter-year financial statements.
Sami Kassab, an equity analyst at investment bank Exane/BNPP was present and issued a note for clients saying that Eutelsat’s management made a convincing case that it was well on track in its opex, capex, tax reduction strategy and that the top-line should improve from H2 19 and grow in FY20.
“Management argued that some recent contract wins in Ethiopia and Afghanistan came in later than initially anticipated. This explains the change in video guidance from ‘stable to slightly growing in FY19’ to ‘stable to slightly growing’ in H2 19, with FY19 guided to be ‘stable’,” said Kassab.
The bank’s note also updated investors with the news that Eutelsat’s ‘Konnect Africa’ broadband service will ultimately serve 19 countries. “Eutelsat targets having launched in 12 countries by FYE19e. While its track record in residential broadband in Europe and Russia has not been convincing, we believe the slower-than-expected ramp-up is not indicative of a lower long-term opportunity for the project. Note that management targets IRR of at least 12 per cent for Konnect Africa.”
Kassab mentioned that while Eutelsat’s share of the North American C-band market is less than 5 per cent of the total, nevertheless “management remained confident that a successful outcome was more likely than not”.