November 7th saw satellite operator SES present its latest set of numbers. By and large the all-important analysts thought they were solid, and there was an initial uptick with share prices jumping from €3.50 to €3.81. But within a few hours that optimism had vanished and SES suffered the ignomany of falling to a 52-week ‘all time low’ of just €3.44. November 8th saw a further decline to €3.39 by the end of the day and yet another all time low.
SES CEO Adel Al-Salah had presented the results and the company’s forecasts were largely endorsed by market analysts. He explained that SES was using Starlink, itself a very successful and powerful, simple, standard constellation able to serve a large part of the demand. However, he also argued that SES has built a sophisticated infrastructure and service model that Starlink may find hard to replicate.
SES is offering managed services, installation services, cybersecurity services, multi-orbit services that Starlink is not offering. SES also guarantees capacity availability whereas Starlink sells its capacity on a best-effort basis. Therefore, SES is well positioned to service a certain segment of the market that require such services.
Sami Kassab, an analyst at investment bank BNP/Paribas, noted that Starlink has a distribution partnership with SES in its valuable Cruise market. “We continue to believe that comparing SES to Starlink is like comparing a Ford pick-up truck to a Ferrari. Both are cars that take you from A to B but both are designed and commercialized to address different customer segments,” advised Kassab.
“Out of the 320 cruise ships sailing the seas, SES mPower capacity is currently installed on 100, a number likely to increase in the short to medium term. These cruise ships coupled to the recently awarded NATO contract are taking up almost all of the capacity currently available on mPower. Upcoming launches of extra mPower satellites (in December 2024 and 2025 and 2026) will treble the total capacity available on that new constellation,” said Kassab.
But perhaps the best news from SES referred to the recently awarded IRIS² giant contract for a highly secure new constellation which will bring together the combined assets of SES, Eutelsat and Spain’s Hispasat.
Kassab said, “On IRIS², SES disclosed that they will start generating revenues from this project next year. These are likely to be limited engineering-work related revenues. Further revenues will be generated throughout 2025-2030 for the roll out of the ground system and the delivery of various contract milestones. Capacity revenues (the vast majority of project related revenues) are to start materializing once the system has entered into service in 2030. All European nations will be anchor customers of IRIS² and use capacity on a take or pay basis for the HardGov layer of the system. This coupled to other undisclosed built-in mechanisms leads to reaffirm our view that IRIS² will lead to a guaranteed minimum Internal Rate of Return (IRR) for SES and underpins management’s confidence in delivering a double-digit IRR on that project. We continue to see IRIS² as a very supportive development for European satellite operators.”
The bank’s summary said, “After 10 years of underlying decline in Group EBITDA, management confirmed that it is expecting to see ‘at least stable revenues and EBITDA in 2025’. Our forecasts are unchanged. The 14 percent dividend yield looks increasingly sustainable and attractive. Satellites and SES remain high risk investment cases but we reaffirm our Outperform on the stock.”
