Bank: “Eutelsat negative, SES positive”
November 15, 2023
Investment bank BNP/Paribas has resumed coverage of Eutelsat and taken advantage of the move to take a close look at Europe’s two satellite giants Eutelsat and SES.
The report is not overwhelmingly positive. It favours SES with a reiterated ‘positive’ recommendation, but its view of Eutelsat is reiterated as ‘negative’. The bank also cautions that satellite is a “structurally challenged industry” not helped by pressures on their declining Video divisions.
“After a period of restriction, we resume coverage of Eutelsat at Underperform with a €4 target price, as we find the current risk reward profile unattractive. We remain Outperform on SES given its stronger balance sheet, better Video revenue and cash flow trends and more tangible evidence of market share capture in Networks,” says the bank’s analyst Sami Kassab.
“We think SES has the balance sheet capacity and the satellite set up (mPower 5&6 launched on November 12th) to defend its >9 per cent estimated dividend yield. In the structurally challenged satellite space, we see SES as a high-risk investment but its currently more attractive fundamentals and 25 percent trading discount to Eutelsat on EV/EBITDA 2024e make it our relative preferred play,” he adds.
As for SES’s share Target Price, the bank places it at €10 (and thus with a 92 per cent upside based on their current trading of about €5.20). However, Kassab also reminds clients that satellite stocks remain “volatile”.
The report says that for SES its total video capacity consumption has “stabilised” in recent months and the bank says it expects more favourable revenue trends at SES than Eutelsat in the next 12 months. The bank expects Video revenues at SES to decline this year by 4 percent and to fall 7 percent for Eutelsat.