Analysts Remain Bullish About Eutelsat’s Prospects

[Satellite News 08-04-08] On July 31, Eutelsat Communications issued its full year results for the year ending June, which once again saw the operator post solid revenue growth driven by strong performance in the video applications arena.
Analysts remain bullish about the operator’s prospects and say that the latest results reflect the dynamic nature of the FSS industry.
    Eric Beaudet, a satellite equity analyst at Natixis Securities said in a research note, “These figures further underline the strong demand for satellite capacity, reflecting the ramp-up of both HDTV (Eutelsat now broadcasts 49 HD channels, up from 17 last year) and of bouquets of channels in emerging market zones (eastern Europe and Africa/Middle East). With seven new satellites due for launch out to end-2010, Eutelsat is in an ideal position to exploit this growth. Indeed, the group is planning to expand its capacity in orbit by over 32 percent while developing new orbital locations (9°E, 36°E).”
    Loic Sabatier, a satellite equity analyst at Cheuvreux echoed these sentiments. He said in a research note, “Market trends are excellent. Eutelsat updated its mid-term guidance for FY revenue growth, of 6 percent on average between 2008 and 2011, vs. 5.5 percent in 2007-10 previously. We expect 6.9 percent but are confident in our estimate. As for 2008-09, Eutelsat expects an EBITDA margin above 78 percent (we expect 78 percent). Even if the utilisation rate is already high and new launches will come late in 2008-09, this may appear a bit shy. Eutelsat has however proven a good track record in upgrading its guidance throughout the year.”
    Sabatier said the FSS industry was very “dynamic” right now. He added, “(Eutelsat’s) good FY 2007-08 release showed that the FSS industry is very dynamic. Eutelsat notably benefited from: 1) an increase in channels broadcast, notably in emerging markets such as Russia/Africa (up 49 percent year-on-year), Turkey (up 15 percent year-on-year), and the Middle East; 2) the multiplication of HD channels (from 17 to 49); 3) the take-up of the new Eurobird 9 orbital position (from 20 to 125 channels broadcast), on which Hot Bird 7A satellite’s move from 13°E (after Hot Bird 9’s launch in October) will add capacity (18 transponders); and 4) new services, such as broadband for professionals, trains and individuals (Value-Added Services were up 10.6 percent year-on-year).”
    For the 12 months to the end of June, Eutelsat generated overall revenues of 877.8 million euros ($1.37 billion). At the same stage last year, the operator generated overall revenues of 829.1 million euros ($1.29 billion). This represents a close to six percent increase compared to last year’s figure. Video applications generated 649.4 million euros ($1.01 billion) of this 12 months revenue, and increased by 10 percent compared to the same stage last year. However, data services revenues declined over this period. For the year to the end of June, Eutelsat generated 117.8 million euros ($183.56 million) in terms of data service revenues, a decrease of close to eight percent compared to the same stage last year. Eutelsat also said that at the end of June the number of transponders it leased had increased close to 16 percent to 468. Its overall net debt increased by over 5.5 percent to 2.42 billion euros ($3.77 billion).
    Beaudet said the numbers were ahead of expectations.
    “Sales were up 5.9 percent year-on-year at 878 million euros, just beating our forecast and the consensus average – 872 million euros ($1.36 billion), thanks to higher than expected gains on currency hedging and a fine operating performance, with a 19.7 percent increase in the number of channels broadcast over the year and a utilisation rate now towering at 93.4 percent (up from 80.0 percent a year earlier). This enabled Eutelsat to clock up a record level EBITDA margin at 79.3 percent (vs. 78.5 percent expected).” Sabatier added, “We were expecting an EBITDA margin of 78.5 percent for FY 2007-08, vs. 78.7 percent one year ago (or 78.4 percent in FY 2006-07 restated for the oneoffs) and the company’s guidance of ‘above 78 percent’. This excellent performance was notably driven by a very high fill rate (93.4 percent). In all, net profit came in bang in line at 172.3 million euros ($268.25 million).”
    Bertrand Laport, a satellite equity analyst at Fortis Bank also highlighted the strong EBITDA margin number. His research asserts that, “Thanks to a record high fill rate of 93.4 percent vs. 80 percent last year, Eutelsat improved its EBITDA margin by 6.6 percent to 79.3 percent vs. 78.6 percent expected (686 million euros or a 1.5 percent spread; +1.6 percent vs. consensus). Considering that most revenue growth came from less profitable emerging markets, the EBITDA improvement is very good news.”