The news that Steve Collar, SES’s CEO, is stepping down sent the satellite operator’s shares into near-meltdown. Over the past 5 days the SES share-price has fallen 14.70 percent, including a further 1.55 per cent on June 13th to an ‘all-time low’ of just €4.70.

Confidence in SES seems to have evaporated. A report from investment bank Berenberg outlines the problem, saying that satellite management teams (and thus not just SES) face a lack of investor trust.

“SES is now valued at negative equity value, [excluding the expected income from the FCC’s C-band compensation] worth $3 billion. This payment is expected to incur 18-19 per cent tax, meaning that the amount to be received will be about €2.3billion, or 105 percent of SES’s current market cap of €2.1 billion, after [the June 12th] share price move.”

“In addition, SES is reimbursed for additional costs that it incurs in clearing the C-band spectrum. At the Q1 results on May 3th, SES said that the C-band clearing cost that it had incurred, but expected to be reimbursed for in the future, stood at about $600 million. Also including this amount increases the total amount of future C-band proceeds to €2.8 billion, or 130 per cent of SES’s market cap of €2.1 billion. The stub equity is therefore currently valued at €(0.7)billion. Adding in SES’s Q1 net debt of €3.3 billion and hybrid bonds of €1.2 billion, the group’s enterprise value is now about €3.8 billion.

“SES guidance for 2023 EBITDA is for €1,010 million-1,050 million, meaning that it is now trading on below 4x EV/EBITDA. SES’s dividend of €0.5 per A-share means that it is now trading on a 10.5 per cent dividend yield, and we forecast the dividend increasing to €0.6 per A-share at the 2023 full-year results, once the C-band proceeds are received,” says Berenberg.

The bank’s note also referred to Collar’s “odd time for a departure”. The bank said: “We believe one factor that contributed to the scale of yesterday’s share price weakness was that the timing of Mr Collar’s departure feels very odd. This is for three reasons:

1) O3b mPOWER is close to launching commercial service;
2) C-band proceeds are close to being received; and
3) SES’s statement on 29 March 2023 that it was in possible merger talks with Intelsat.

“One would think that Mr Collar would want to stay to see the first two projects completed before leaving, while any merger talks with Intelsat would certainly be complicated by this change of management. We believe the wording of the SES press release is important in providing some comfort around the first two of these.

Collar’s leaving quote said: “With O3b mPOWER launching, the company performing well and C-band all but delivered, the future is bright, and I wish the board and everyone at SES every success.”

“If there was any material issue with either O3b mPOWER or the C-band clearing programme, SES would not have included this sentence in the release,” states Berenberg.

Nevertheless, the bank calls for some urgent remedial action from the SES board. It wants SES to explain how shareholders will be rewarded from the C-band proceeds, and asks how the proceeds will be utilised.

“Investor trust in satellite management teams is so low that neither C-band proceeds, nor the return to growth that O3b mPOWER should support, are being fully priced into the share price until they are actually seen. We believe this creates the opportunity for investors willing to look just six months ahead,” adds Berenberg.

Other posts by Chris Forrester:

1. Scotland’s rocket launch gets closer
2. SpaceX tops 6,300 Starlinks; IPO rumours
3. Full details of SES, Intelsat deal
4. Ariane 6 launch campaign underway
5. Virgin Galactic in stock split
6. Thuraya-3 suffers major problem
7. AST SpaceMobile hit by Class Action
8. Optimism under threat at SES
9. Rivada visits Terran Orbital’s manufacturing HQ

Categories: Blogs, Business, Inside Satellite

Tags: berenberg, SES, steve collar