Bank: “SES our top conviction”

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As previously reported, two US Republican senators have called on the FCC to take speedy action on the proposed C-band auction.

A bank’s special report says that the prospects for investors in SES (and by implication Intelsat) are now potentially capable of considerable upside benefits states Exane/BNPP.

“On our weighted-volume assumptions, we believe that the market is assuming C-band spectrum pricing of a net $0.13, half our own assumptions.”  One of the bank’s equity analyst, Gareth Hollis, says that the current SES share price fails to capture 50 per cent of the spectrum value opportunity.

The bank’s note says: “The next catalysts are the fillings to the FCC C-band docket and introduction of US C-band legislation in May/June. Q2 [from SES] results end of July and FCC final order in H2-19. Despite some political pressures the C-band auction results are unlikely to come until late 2019/early 2020. Thus, some ask whether they want to hold SES though 1-2 quarterly results which can elicit significant share price volatility while satellite capacity pricing remains under pressure. Industry fundamentals will continue to be challenging but overall we expect Free Cash Flow growth as volumes expand and capex to decline rapidly. Moreover, HF buyers are circling so the time to Buy is now – don’t wait for the FCC final order in H2-19 as the market will start to price in higher volume and value for C-Band.

Another investment bank (Deutsche Bank), also commenting on the two senators comments, shared the ‘undervalued’ view, saying that while there appeared to be a growing consensus in the US for swift action, the uncertainty is whether this is best achieved by the plan put forward by SES, Intelsat and Eutelsat (C-Band Alliance) for a private auction or publicly-run auction, and how much of the proceeds should be kept by the satellite operators. “We value C-Band at €9 billion in our SES valuation based on 200Mhz spectrum at $0.33Mhz/pop and 300 million pops.”

SES saw some upside movement on May 14th, rising 3 per cent during the day.


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