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Bank trims SES expectations

November 29, 2023

A report on satellite operator SES from investment bank Berenberg maintains its ‘BUY’ recommendation, but the report has cut the bank’s share price target from €9.20 to a much more modest €7.20. The SES share price on November 28th was €5.40.

The Berenberg report, Rebase done; Now on to returns, says it expects SES too increase its annual dividend to investors by a few cents (from €0.50 to €0.52) which is not likely to set too many pulses racing. However, the bank also expects SES to distribute about €1 billion from the recently received $3 billion of FCC compensation payment to a shareholder return.

SES will hold its year-end and Q4 results announcement in February 2024 and the bank expects the operator’s Video division revenues to fall by 6.1 per cent for its Q4 trading. It also suggests that SES’s Mobility division, which is normally in positive territory, to fall by 4.6 per cent.

Berenberg expects SES to deliver more commentary on the IRIS2 European consortium to build a new satellite constellation. The EU contract is due for signing in the new year.

The bank also says that SES’s guidance for next year’s trading is ‘de-risked’.

Berenberg says: “For the last three years, SES has issued guidance for the upcoming year including a €50m-60m-wide absolute revenue range and a €40m-wide adjusted EBITDA range. Our base case is for SES to guide to 2024 revenue of €1,880m-1,920m (Berenberg €1,903m) and adjusted EBITDA of €960m-1,000m (Berenberg €976m).”

The report adds: “The main point to flag is that we have not yet tried to fully forecast what SES will do with the bulk of its C-band phase two proceeds. This makes SES look underlevered from 2023 onwards. The company has stated that while the first payment has been used to strengthen the balance sheet, the second payment will be used for a mix of shareholder returns, balance sheet strengthening and any disciplined value-accretive investment.”

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