[Satellite TODAY Insider 01-24-11] Analysts’ stock potential projections for Hughes surged after Reuters reported Jan. 20 that the company retained Barclays Capital to auction off the company.
    “News last night that Hughes has been put up for sale saw the shares spike 13 percent,” Raymond James analyst Chris Quilty wrote in a report. “We reiterate our strong buy rating, as we believe Hughes’ EBITDA expectations are achievable on the back of likely upside in the consumer business in 2011, promising longer-term trends in the enterprise VSAT business and international expansion.”
    While Hughes would not comment on the Reuters story to Satellite TODAY Insider, the company would not deny that initial bidding for the company would begin in early February.
    Hughes’ majority owner, Apollo Management, has held a 57 percent stake in the company since 2004. Quilty said Apollo’s desire to auction off the company may be an effort to avoid a liquidity trap. “We suspect that Apollo may have grown frustrated with Hughes’ consistently depressed ‘public company’ valuation (historically two to four times its forward EBITDA, as compared to seven to 10 times for ViaSat, Hughes’ closest peer) … We have regularly argued that Hughes’ valuation discount is primarily a by-product of the stock’s minimal float and poor trading liquidity,” he said.
    Raymond James’ speculates that Hughes could potentially generate a share price range of $75 to $100 per share. Quilty said that while he sees no reason why Hughes’ shares shouldn’t trade up to that level, there are some downside risks for Hughes investors, especially considering that Apollo refused to sell Hughes stock for $50 during a 2008 offering.
    “Should Apollo fail to receive a sufficient offer, there is a risk that the stock could fall back to Earth. We think this outcome is unlikely, however. Although Hughes’ liquidity issues would still exist, investor ‘awareness’ of the Hughes story would likely support a share price in the mid-$60 range,” said Quilty.

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