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Q4 revenue beat expectations SES Q4 revenues came 7% ahead of expectations with both Video and Networks at the higher end of expectations. Solid mPower terminal sales in Government helped drive the beat and are a good leading indicator for future demand for mPower capacity. An unexpected change in regulation resulted in a new recurring EUR16m annual charge all booked in Q4 23. This explains the lower-than-expected EBITDA and EBITDA margin for Q4 23. Capex was lower than expected. DPS is in line. SES is moving to a semi-annual dividend payment with an additional EUR0.25 in October. FY24 outlook 3-4% ahead of expectations Management guided for growth in SES Networks and a mid-single-digit decline in Video, resulting in a guided revenue range 3% ahead of consensus at the midpoint. Management suggested it is aiming for the upper end of its EUR1,940m-2,000m range. Despite higher start-up costs, EBITDA 24 guidance came in line with expectations. We raise our FY24 revenues by 4% and EPS 24 by 2%. Good progress on deleveraging With a further USD410m of FCC payment and a potential USD472m insurance claim pending, SES''s balance sheet leverage is trending towards 1x. Management has announced the repayment of EUR1bn of gross debt. Solid progress on the deleveraging is a positive, in our view. More clarity on capital allocation at the interim results The negative share price reaction likely reflects the lack of announcement on capital allocation. With IRIS2 potentially requiring a sizeable investment (newsflow expected in March/April), we find it understandable that the CEO of 4 weeks needs more time to formulate the capital allocation strategy. For the benefit of long-term shareholders, we continue to argue that protecting the balance sheet of a company in a disrupted industry should take precedent over cash returns. We expect SES to return to sustainable top-line growth from FY25 as mPower takes off. We remain Outperform.
SES SES SA FDR (Class A)
SES beats on Q3 and confirms guidance for FY23 SES delivered EUR507m and EUR262m of Q3 revenues and EBITDA, some 4% ahead of consensus. Group organic revenue growth of 3% was the strongest in 8 years and marked the second consecutive quarter of revenue growth. SES Video declined by 2.5% (vs. consensus at -4/-5%) and SES Networks reported 9% orgrev growth (vs. cons at +2%). EBITDA margins of 52% were in line. Management has reaffirmed its FY23 guidance. mPower entry into service delayed to April 2024 SES and Boeing have signed a new commercial agreement. Boeing will upgrade mPower satellites 7 to 11 and manufacture two additional spacecrafts with no impact on SES capex. We believe it had to concede this commercial gesture as tech issues on batch 5 and 6 to be launched on November 12th have not been fully fixed. Tech issues will affect the operational life of mPower 1-6 and lead to an impairment charge in FY23. Satellites are insured and management believes have enough capacity to service existing and future customers. However, this delay drives our EPS cut. C band cash leads to significant deleveraging SES has cashed in the C band bonus payment and will receive an additional EUR445m from the FCC for expense reimbursement. Net debt to EBITDA stood at 3.5x as of September 2023 but will fall to 1.4x by year end. C band cash proceeds will be used to call the EUR550m/5.625% hybrid bond in January 2024 with the remainder yielding 5% pa. Financial charges will be significantly lower next year and alleviate the operating impact of the mPower launch delay and capacity constraint. The EUR150m (4% of market cap.) share buyback is to start within days. Last bit of bad news... we think! With the November 12th launch imminent and the full scale of the mPower tech issues now disclosed, we believe the mPower equity story is likely to regain momentum. 2025 is likely to mark a return to sustainable growth. This is much later than hoped for but still makes the...
H1 beat expectations as SES returns to revenue growth after 5 years of decline After 5 years of revenue decline SES has returned to positive organic revenue growth with a consensus-beating +0.6% in Q2 23. This performance was driven by lower-than-expected revenue decline at SES Video as contracts indexed on inflation helped pricing while SES Networks accelerated on strength (+30%) in Maritime. EBITDA came 4% ahead of expectations. mPower delayed to end of year and tech issues revealed Management has announced another delay in the entry into service of mPower, now expected by end of 2023 (vs. late Q3 23 previously). We believe the many delays have to be seen in the context of the tech issues revealed by the company. Management argued that mPower had encountered sporadic technical issues on a fraction of the electronic components of payloads already in orbit. Management claimed it can recover functionalities as these glitches happen and that it has adapted its procedures. Management does not expect a short- or long-term impact. We note that SES 17 and mPower combined backlog expanded by 4% in the quarter despite consumption on SES17. Full-year guidance reaffirmed. Share buyback announced as C band proceeds arrive in Q4 Management has confirmed all elements of its FY23 guidance. It also announced it had completed the C band clearing ahead of schedule and would receive the USD3bn pretax bonus payment in Q4. Management announced a surprise EUR150m share buyback. Outperform reaffirmed We have adjusted our 2023 forecasts to reflect the new start of mPower, lower video decline, the share buyback and forex. Our 2023 and 2024 adj. EBITDA remain 2% and 9% ahead of VA consensus pre release. We continue to believe in the commercial success of mPower and hence in the sustained return to growth of the company, which is far from discounted in the share price. A contract award from the EU Commission on IRIS2, increased cash returns to shareholders post C band...
SES delivers solid Q1 results and reaffirms FY guidance SES revenues and EBITDA came in 1% and 4% ahead of consensus respectively. SES Networks'' organic revenue growth of 3% was ahead, driven by 14% growth in Mobility. SES Video was in line with expectations at -5%. EBITDA margins beat consensus expectations by 170bps. All elements of the guidance have been reaffirmed. Confirmed to be in talks with Intelsat SES confirmed on March 29th that it has engaged in talks with Intelsat with regards to a possible combination. Management did not disclose any further details. While we believe that at the right price such a deal would make strong financial sense, we still think the strategic angle is more debatable. We note that we estimate the NPV of the tax benefits that SES would generate to be at 20% of its current market cap. mPower, C-band, IRIS2 projects are all progressing well SES has completed more than 90% of its C-band repacking and is well on track to receive USD3bn in C-band payments by year end. Next month, Space X is due to launch the two last satellites needed for mPower to launch its global service in late Q3. With SES joining the consortium, which comprises all of the key players in the European space industry (Eutelsat, Hispasat, Airbus, Thales), the likelihood of the company benefiting from the IRIS2 project increases significantly. Forex-driven EPS revisions. Outperform maintained We have marginally raised our underlying revenue growth forecasts for FY23, driven by the solid performance of SES Networks. Recent forex movements drive most of our EPS revision. We continue to expect SES to return to revenue growth next year as it benefits from the entry into service of mPower. C-band proceeds will improve the balance sheet structure (from Net debt/EBITDA of 3.6x currently to 1x) and make valuation appealing. IRIS2 adds further positive optionality contributing to the return to growth. However, we believe that investors will need more...
SES delivered a strong set of Q3 results. The numbers came in slightly above expectations and the company reiterated its increasingly conservative guidance. Although the satellite launches are progressing as planned with the first launch of the O3b mPOWER expected in December, the entry into service date has been postponed by one quarter. We believe the company will demonstrate resilience next year as it remains driven by the Network activity.
SES reported solid Q3 results with a 3% beat on EBITDA SES Networks organic revenue growth accelerated to 4% in Q3 22 (vs. cons. at 3%) driven by a 21% jump in Mobility (cruise and areo) and growth in Fixed Data. With the headwind from the 2021 US troops withdrawal from Afghanistan abating in Q4, we expect the division to accelerate further in Q4. Video was in line and EBITDA came 3% ahead. Management confirms outlook Management has confirmed all elements of its FY22 outlook and reaffirmed that it expected SES Networks to gradually accelerate towards double-digit revenue growth, while it was aiming to ''flatten the curve'' of revenue decline in SES Video. First mPower satellites to launch on December 15th Management has now communicated the launch date of the first two satellites of its new mPower system. Space X is scheduled to launch them on December 15th. This will be followed by the launch of an additional 4 satellites in Q1 23 and an entry into service in Q3 23. With mPower ground equipment currently being deployed, mPower will start generating incremental revenues on Day 1. Its adjusted order backlog grew by a further c4% in the quarter. C-band proceeds within reach SES has successfully launched its first 3 C-band satellites and has consequently line of sight of the upcoming USD3.2bn gross proceeds from C-band clearing. We expect proceeds to be allocated to deleveraging, cash returns and reinvestment, possibly in the new EU space system. Outperform maintained We have tweaked our forecasts with no meaningful EPS changes. With the mPower launch confirmed we continue to expect SES Networks growth to accelerate and to offset Video decline next year. We reaffirm our Outperform rating and see the 15 December launch as the next catalyst.
º Mobility performs above expectations Guidance unchanged, C-band plan is on track
Satellite communications have entered the NewSpace age, where a tech-investment boom and the emergence of massive non-geostationary constellations are likely to reshuffle the cards between established players and deep-pocketed new entrants. In this report, we review market opportunities in the sector, as well as technological disruptions and the challenges facing incumbents, while extending our coverage to initiate SES and Eutelsat. We initiate Eutelsat with a Sell recommendation, with the acquisition of OneWeb heavily weighing on financials and the risk profile. We initiate SES with a Neutral recommendation: rising LEO initiatives are adding new and credible competition to SES’s low-latency MEO constellation. While expectations from C-band proceeds cannot be ignored in the share price, capital allocation remains uncertain in a context of growing competitive threats.
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