Advanced Television

Bank examines SES and Eutelsat

February 9, 2022

By Chris Forrester

SES and Eutelsat, Europe’s pair of important satellite operators, have come under the microscope from investment bank Exane/BNPP. SES comes out of the report well. Eutelsat, less so.

The bank forecasts that by 2024 it estimates that SES could be 24 per cent ahead in terms of its EBITDA numbers and therefore with a 45 percent upside in terms of its (currently miserable) shareprice of some €6.90 and suggests that €10 could be in sight. This recovery is without the upcoming C-band payment from the FCC due at the end of 2023. SES CEO Steve Collar has already promised “shareholder benefits” will flow from the FCC’s pay-out.

The bank says: “We expect [SES] management to guide for an acceleration of growth in Networks in 2022, while mPower is set to launch in Q1 22. The lawsuit against Intelsat is about to end and SES could earn cash or common stock in the [Intelsat post-bankruptcy] Newco. In a challenged industry, SES remains a high-risk investment, but with some 40% upside we buckle up for take-off. New EU policies would be a key catalyst.”

“SES looks particularly well placed in our view,” adds analyst Sami Kassab. “Not only is SES the only European player to operate a multi orbit MEO/GEO system but it is also about to launch mPower, its next generation satellite constellation. mPower would help facilitate the 2024 timetable that Thierry Breton has referred to [while speaking at a recent European conference on space-based activity].”

However, the bank’s assessment of Eutelsat is not quite so rosy, and the bank’s report says the situation at the Paris-based operator as being more complex. Using the same parameters, the bank forecasts only a 1 percent increase in EBITDA by 2024, and a 17 per cent uplift in Eutelsat’s share price (from today’s €11 to €13). The bank says: “We remain Neutral on Eutelsat as an imminent revised bid ahead of French elections looks unlikely. We note some improvement in video capacity consumption trends but remain sceptical on the group’s fundamentals in the Networks division at a time of leadership change.”

“We believe OneWeb is currently considered as not European enough to be part of the EU proposal [for a new European Broadband/LEO constellation],” says Exane/BNPP. “On its own Eutelsat does not have any LEO or MEO broadband satellites nor does it have plans to launch any. It is also going through a change in leadership. On the other hand, Eutelsat Konnect VHTS and Eutelsat Konnect are most likely to feature in this project. Capacity procurement contracts on these two spacecrafts are therefore quite likely in our view.”

Kassab adds that Eutelsat is also trading at the lower end of its historical range, commenting: “But we have been more sceptical on the ability of the group to navigate through the new competitive paradigm in the age of mega constellations. Its 23 percent equity stake in OneWeb will certainly help but the risk of kitchen sinking from the new CEO in the context of structural challenges has us remain on the fence. We are also increasingly sceptical of an imminent revised take-over offer.”

The bank admits that its numbers could be over-taken positively by events. It stresses that growth in the global space economy is set to accelerate and the industry is entering a new space age, noting: “We believe Europe and European governments have now become aware of the economical and geopolitical issues at stake and are likely to react soon and at scale. We think this is likely to benefit European space companies and see SES particularly well positioned. We expect the European Union and the European Space Agency – with the support of European governments – to announce a substantial investment in the development of a next generation European multi-orbit broadband constellation system. We also expect Europe to award capacity procurement contracts to the company(ies) operating this new constellation.”

The bank’s report help drive SES’s share price upwards by some 2.37 per cent (to €7.12) on February 8th.

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