SES share buy-back boosts shares

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The first-quarter results from satellite operator SES were buoyant, and helped by a commitment to buy in €100 millions-worth of its own shares for cancellation helped boost SES’s share price by almost 10 percent.

At the end of the day the shares were up 9.3 per cent to – a still miserable in some eyes – €6.65. At the end of March, for example, they were trading at €7.32 and as recently as November 2020 at €8.53.

The quarter’s results, and an apartment commitment that SES would use part of its $3 billion second-tranche payment from the FCC’s incentive C-band compensation for “shareholder benefits”, also helped bring confidence into an overview.

CEO Steve Collar spoke about future C-band compensations from Canada (“in the shorter term”) and Brazil (“not a huge monetisation value”) as well as further opportunities for cash to flow from the US over C-band frequencies. He stressed that its own work in clearing spectrum and fitting filters for its US clients as part of the C-band process was ahead of schedule.

The first C-band reward is due if a key December 5th 2021 clearance date is met. Then, in 2022, SES will get $1 billion from the FCC. The larger $3 billion FCC pay-out will be due in 2023. SES is also suing Intelsat in its bankruptcy court for $1.8 billion (and which Intelsat is “vigorously defending”. The hearing will take place this summer probably in June.

Collar told analysts that this year would see Video revenues stabilising (“the [downward] curve is flattening” he said, and that this year’s overall -6 per cent fall would be comfortably within guidance. And implicating that it would be beaten. He said the rate of Video contracted renewals was good with 90 percent now contracted. Sky had now renewed to 2027 and there was “excellent momentum”.

“Recovery will not be miraculous this year but will return in 2022,” said Collar. Acceleration would occur in 2022 helped by revenues from SES-17’s launch and the introduction to the SES fleet of its first O3b mPower satellites. Thereafter, he said, 2023 would see growth.

Giles Thorne, an equity analyst at investment bank Jefferies, in his The Empire Buys Back report, said that the SES Q1 numbers were “collectively constituting a clarion call from this old-guard satellite incumbent to value investors that the market has got it wrong.”

He added: “Inevitably, the Eutelsat $550m investment in OneWeb was a backdrop for new lines of inquiry into industry consolidation (response: the sector still needs consolidation, being in different orbits doesn’t preclude consolidation, some consolidation synergies can perhaps be achieved via technology, SES will be watchful and opportunistic) and competition (response: LEO is still hard to commercialise, MEO sweet-spot of service and bandwidth economics, the service-wrapper allows for value-based pricing, SES’s first-mover status in Cloud looks well protected).”


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