[Satellite News 07-29-11] While the latest financial reports issued July 29 from Eutelsat Communications and SES provided an overall positive outlook for the two FSS operators, the conservative results received mixed reactions from analysts and disappointment from the investment community.
Eutelsat’s 2011 full-year results saw the operator generate 1.168 billion euros ($1.67 billion) in the 12 months to the end of June — an increase of more than 11 percent compared with the same stage last year. Net profits also showed a healthy 25 percent increase to 338.5 million euros ($485.15 million).
Eric Beaudet, a satellite equity analyst at Natixis Securities said Eutelsat’s results were in-line with expectations. Despite highlighting positive cost control efforts that made it possible for the operator to generate an EBITDA margin of 79.3 percent, Beaudet maintained a ‘neutral’ rating on the stock.
“This is because [Eutelsat’s] guidance targets for 2011-2012 have largely been factored in by the consensus for both revenues greater than 1.235 billion euros ($1.77 billion) versus a 1,253 billion euros ($1.80 billion) estimate and EBITDA of 955 million euros ($1.37 billion) versus 984 million euros ($1.41 billion) estimates,” Beaudet said in a research note. “Also, the lack of detail on how successful the Ka-Sat Ka-band satellite has been, which alone accounts for almost half of the growth expected over the next few years, should limit the share’s gains in the short-term.”
Jefferies International Satellite Equity Analyst Nick Bell said the operator’s projections for growth in 2012 remain too conservative for comfort. “Sales growth of 11.5 percent was slightly ahead of both our estimates at more than 11.3 percent and the consensus expectations of more than 11.4 percent. Management guidance for the full-year 2012, however, was conservative, with growth of 5.7 percent compared with our current forecast of 9.2 percent. We see the stock as being fully valued. The push back in revenue growth from full-year 2012 to full-year 2013/2014, plus the conservative level of guidance compared with consensus, may disappoint the market.”
SES’ 2011 first-half results showed that the operator generated revenues of 853.2 million euros ($1.22 billion) through June — an increase of 3 percent compared with the same stage last year. The operator also said that operating profits increased 4 percent to reach 402 million euros ($576.16 million) compared with the same stage last year. Analysts, however, said they would probably revise SES’ rating slightly downward as estimates take the weaker U.S. dollar into account.
Like Eutelsat, Bell said SES portraying trends that were positive in some categories and negative in others. “SES second quarter sales come out in-line with expectations at 423 million euros ($606.26 million) compared with 425 million euro ($609.12 million) estimates. That mix, however, could prove a bit disappointing as the more visible and profitable infrastructure segment comes out below expectations while the more volatile services segment comes out above expectations.”
Bell added that SES’ disappointing sales mix prevented its 73.3 percent EBITDA margin from meeting expectations of 74.9 percent estimate, but that its 83.3 percent infrastructure EBITDA margin represents a very strong performance. “[SES’] infrastructure EBITDA margin was above our expectations, which bodes well for the future as it is a fixed cost business and should therefore be sustainable. This performance could even be improved upon as the group is putting in place some cost-cutting and rationalization efforts, with 15 million euros ($21.5 million) in restructuring with a one-year payback.”