There’s an old joke that boaters will know all about, which is how do you end up with a $1 million-value boat? The answer is to start off with a $2 million-value vessel and wait a year or two.
Gareth Hollis, an analyst at investment bank Exane/BNPP has a variation on the joke, and he asks how to make $2 million, and his answer is to start with $3 million and invest in satellite operator SES…
He admits he is cheeky, and a tad glib, but says the past few days have “certainly been one of the more testing periods of investing I’ve experienced,” and that he hopes other investors have had a better week than him.
“Over the past 7 days Intelsat and & SES are off 65 per cent and 30 per cent respectively, and as panic spread finding investors to absorb forced sellers hitting stops has clearly proven difficult.”
Nevertheless, Exane/BNPP is sticking with SES and says that it does now feel like we are past the point of maximum capitulation.
The bank argues that despite all the bad news from the FCC it still finds a 35 per cent upside on SES, assuming its frequencies sell at a conservative $0.25 per MHz POP, and with anticipated revenues from the FCC auction spread over the period 2020-2023 this should translate into €5 per share for the SES C-band spectrum rights.
He also admits that there’s still a way to go with the C-Band Alliance, not least legal challenges, an FCC-agreed alternate plan and the possibility of a T-Mobile/Sprint merger failure, which all could translate into an upside for “an extremely beaten up stock”.