Bank favours SES over Eutelsat

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Different investment analysts regularly come up with varied opinions as regards their favourite picks in the satellite industry. Now Sami Kassab, from investment bank Exane/BNPP, in a major report takes a deep examination into Europe’s two leading satellite operators. He concludes by favouring SES.

His study extends to one of today’s hottest business prospects; SpaceX and its Starlink broadband-by-satellite service. There’s much market commentary as to whether Elon Musk will go to the market and mount an IPO to further fund Starlibk. Kassab believes Starlink will be a success both commercially and financially.

For his report Kassab has spoken to privately held competitors, suppliers, customers, regulators, consultants, satcom engineers and updated our proprietary satellite demand tracker. He says he explored three key topics:

First, Kassab argues that the age of Mega-constellations has arrived. This will change industry economics for ever. It will create a lot of losers amongst incumbents and a handful of global winners. With the launch of mPower, its next generation system, SES will be one of the winners.

Secondly, Kassab argues that the newly created US Space Force is about to announce changes in its satellite communications procurement strategy as it seeks to replace its own aging fleet. We expect the Pentagon to buy more commercial capacity from non-geostationary satellite systems. We see SES as a winner and Eutelsat at risk of upcoming changes with the single largest customer of the industry.

“Thirdly, we conduct a deep dive into Space X. We see strong commercial momentum for Starlink and assuming they get to lower terminal production costs and complete the roll out Starship we believe the business could reach double digit Internal Rate of Return (IRR). However, our analysis of Starlink system architecture suggests it is focussed on rural residential consumers not the enterprise market. Its competitive threat to SES mPower is limited as it lacks bandwidth density, intersatellite links and distribution while SES mPower offers industry leading bandwidth economics,” says Kassab.

Kassab admits that SES’s share price has “found a floor” on current levels and at the low end of its peers. Investors can only hope he is right. “Our medium-term EBITDA forecasts are11 percent above consensus for SES and 6 percent below for Eutelsat underpinning our preference for SES (+) over ETL (downgrade to -).”

The bank gives SES a target price up 43 percent over today’s typical €7 to €10. Eutelsat’s target price has been reduced from €10.70 down 16 percent to €9.


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