Bank raises SES share price target
October 5, 2023

The SES share price is in the doldrums. The past few days has seen its shares trading at about €5.60. However, a report from analysts at Berenberg Bank suggests there’s positive news ahead.
The bank says that with about $3 billion coming in around 10 days from now, the FCC’s C-band compensation scheme gives SES plenty of flexibility. One option, says Berenberg, is to return up to €1 billion to shareholders.
“After 18-19 per cent tax, this represents c90 per cent of SES’s market cap. Focus at the Q3 results on November 2nd will therefore centre on whether SES makes any more announcements on the deployment of this capital, or whether it chooses to wait until the full-year results in February. While hopeful of more detail, we acknowledge that the lack of a permanent CEO, plus a possible desire to gain more clarity on the extent of SES’s involvement in the EU’s IRIS2 programme, may drive prudence. Investors will also be looking for an update on O3b mPOWER launch delays at the Q3 results. With scope for significant positive capital-return catalysts, either on a one- or four-month timeframe, we would recommend investors to take advantage of the recent share price weakness. We increase our price target to €9.3 (from €8.7) due to recent dollar strength,” says Berenberg.
The current value of the Dollar against the Euro is also helping SES (all its capacity is priced in Dollars).
The bank adds that the $3 billion could also be used to repay outstanding borrowings.
“We would also note that the European Union’s IRIS2 programme has planned contract signing by February 2024, which could lead SES to wait until the full-year results in late February before fully detailing its capital allocation approach. We are therefore in two minds about how much further detail we will get on this topic at the Q3 results. Indeed, SES already announced a €150 million buyback at the H1 results, to be completed by June 2024, that we expect to start after the Q3 results. The below back-of-an-envelope calculation shows that there could be c€1bn of additional capacity for shareholder returns. The reason for the increase between 2023 and 2024 is due to the further receipt of c$500m of C-band clearing cost reimbursements, that SES should receive in 2024,” states Berenberg.
But SES has a problem, which the bank explains: “With O3b mPOWER satellites 1-2 launched in December 2022, and satellites 3-4 launched in April 2023, satellites 5-6 had been set to be launched in calendar Q2, which then slipped to Q3. We are now in calendar Q4, and still without the satellites having been delivered to SES by Boeing. Interim CEO Ruy Pinto talked at the Q2 results about a number of sporadic “trip-ups” on a fraction of the power modules, adding that SES and Boeing were investigating this phenomenon. There will be considerable focus at results as to whether this issue has been resolved, and therefore when the satellites can realistically be expected to launch, facilitating global commercial launch of O3b mPOWER services.”
Other posts by Chris Forrester:
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