Satellite operator Eutelsat saw its share price fall by almost 12 per cent on its Q3 revenue statement last week. BNP-Paribas, the financial services company, has now issued a report on the satellite operator.
Sami Kassab, analyst at BNP-Paribas, headlined his note to clients as “More headwinds ahead” and while stressing that Eutelsat’s financial reports were “in line with expectations”.
“However,” said Kassab. “We expect the shares to react negatively to the disclosure of a €16 million revenue and c€16 million EBITDA hit from the French ARCOM regulator expanding the scope of sanctions on Russian media. Note that Eutelsat guidance excludes the impact of Russian sanctions.”
“We also expect some pressure from a poor contract renewal rate with the U.S. DoD in the Spring 2025 campaign. Eutelsat renewed 50 per cent of its contract value (vs. a 5-year average of 75-80 per cent and 70 per cent last year) with the US Dept. of Defense. This underpins the idea that the US DoD demand is moving away from GEO satellites,” said the report.
“Management also indicated that it expects Export Credit Financing is unlikely to resolve the liquidity issue the balance sheet is facing and Eutelsat is looking at options to reinforce their capital structure,” the report added. “Eutelsat faces significant investment requirements to fund OneWeb Gen 2 coinciding with upcoming debt maturities over the next few years. While in the medium to long term, OneWeb could drive double digit revenue growth we believe that balance sheet risk will be a key share price driver in the near term. With higher interest rates for longer we find the current risk/reward profile unattractive.”
BNP-Paribas advice to clients is ‘Underperform’ and a target price of just €1 (current price around €3.51).
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