Bank: “Eutelsat in the balance”

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Paris-based Eutelsat is in a period of significant change. Rodolphe Belmer has left and the satellite operator has appointed Eva Berneke to run the business. There’s also the small matter of a recent bid from Patrick Drahi to take a controlling stake in the business.

All this has helped propel investment bank Berenberg to take a close look at the company’s current and future prospects. As the bank’s 14-page report states: “With revenue and EBITDA in decline, and with a change in CEO bringing with it increased risk to the guidance of a return to growth in 2022/23, there is not much to like in Eutelsat’s standalone investment case. However, it is cheap, cash-generative and could feature in industry consolidation. We believe these qualities were behind Patrick Drahi’s €12.1 per share bid for Eutelsat that became public on 29 September. We believe that Mr Drahi would have to make a much higher bid to tempt the board and its shareholders to accept, but we are uncertain whether he has the desire to significantly increase his offer. With M&A hopes skewing an investment case that otherwise holds limited appeal, we stay on a ‘Hold’ rating for now.”

The bank also pares down its Price Target from €12 per share to €11.80. Of course, a re-instated bid from Drahi (or anyone else with similar credentials) will drive those prospects upwards.

“We view Mr Drahi’s offer as opportunistic, trying to gain control of a cashgenerative company ahead of industry balance sheets being improved by Cband proceeds, potentially leading to further industry consolidation. With no obvious strategic angle connected to his other assets, we find it hard to determine if he will return with a higher bid,” adds Berenberg analyst Carl Murdock-Smith.

Eutelsat will report its half-year numbers (to December 31st) on February 17th. On December 19th, Eutelsat announced that external hire, former KMD CEO Eva Berneke, would take over as CEO from January 1st 2022. The lady has been officially in the hot seat for barely a week.

The bank says: “Any change in management increases risk to guidance. In this case, we would specifically point to Eutelsat’s guidance that it will return to revenue growth in 2022/23. Eutelsat has faced repeated downgrades to consensus revenue expectations, and it is currently very much in the balance whether this guidance is achieved.”


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