Advanced Television

Bank: “SES could suffer much lower revenues”

September 4, 2020

Earlier this week Giles Thorne, a media & telecoms analyst at investment bank Jefferies, gave Eutelsat a set of rosy expectations and a target share price of €18. A similar examination of prospects for satellite operator SES does not deliver the same optimistic forecasts…

Indeed, the bank’s summary is pretty miserable, and despite a ‘Buy’ rating cautions investors that SES stock is “going to remain depressed until visibility is given into how SES keeps it leverage below 3.3x over the next two years.” But then Thorne appears even more critical, saying: “and management credibly ends the downgrade cycle”.

The background to the bank’s downbeat report is that it expects SES Full Year 2020 to fall by a worrying 9.1 per cent (to €1.88 billion) and a tumbling Video divisional revenue fall of 7.8 per cent compared with its previous model.

The bank confirms its new financial Model expects the FCC’s C-band payment receipts, will come in as guided: the first tranche of $0.98 billion to be received in Q1/22, and the second tranche of $2.99 billion to be received in Q1/24.

Jefferies issues a new target ‘base case’ share price of just €14. Over the past 52 weeks SES’s share price has fluctuated widely between €18.12 and a ‘low’ of €4.87. Shares were trading up on Sept 3 at €6.20 (up 3.85 per cent on their September 2nd position).

Jefferies upside price target is much higher at €20 and assumes a strong take-up of capacity especially in emerging markets. The upside target also anticipates an earlier “expected normalisation” of US government demand while enterprise usage declines moderate quicker than expected – which all satellite operators hope for.

But there’s also black reading for its downside scenario where the price target is a miserable €5 per share. This worst-case position talks of Video revenues going into structural decline. Jefferies is also anxious about the risk of the US Dollar depreciating against the Euro, as well as the FCC delaying the important C-band spectrum windfall payments.

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