Value of the day in Paris – Eutelsat supported by CMA CGM’s capital increase – 08/10/2022 at 11:47

(AOF) – Eutelsat gained 4.8% to 9.05 euros. Investors welcomed the capital increase of maritime transport company CMA CGM. The latter exceeded the threshold of 5% of the capital and voting rights of the French satellite operator (5.03%). An investment that confirms the support of Rodolphe Saadé’s group for the marriage between Eutelsat and the British company OneWeb. A merger, announced at the end of July, raised doubts among investors. The French title fell 33% in two sessions to 7.01% on July 26. Since then it has gradually increased.

This growth is not surprising in the capital of the CMA CGM giant. As the merger between Eutelsat and OneWeb was announced, Rodolphe Sade gave his official support.

According to Les Echos, the shipowner held about 3% of Eutelsat. Rodolphe Saade entered the capital when Patrick Drahi launched his bid for Eutelsat last fall, the daily believes.

For a year, CMA CGM has been interested in the aerospace sector, assuring the press that Rodolphe Saadé has a long-term vision of ten or fifteen years within the framework of the group’s transformation. He is convinced that space is the final frontier of logistics.

As evidence, in November, CMA CGM entered into another partnership with Thales, which has not been made public, and which aims to develop an orbital logistics vehicle.

At the end of July, the main shareholders of Eutelsat and OneWeb signed a memorandum in terms of the transaction, which will take the form of a share exchange. The transaction values ​​OneWeb at $3.4 billion, which translates to 12 euros per Eutelsat share.

In light of this announcement, Kepler reduced its Buy to Hold recommendation on Cheuvrex Eutelsat. The research department considers that this merger is bad news for Eutelsat’s minority shareholders, who will become holders of a risky company since OneWeb has not completed the deployment of its constellation (technical risk, additional investment) and will face competition from larger companies. .

Despite a very negative stock market reaction, Eutelsat has defended its takeover of OneWeb, which is building a constellation of 648 satellites to deliver broadband around the world.

At a very high price, but necessary to transform the satellite operator into a global telecommunications player, according to its general manager Eva Bernek, interviewed by Les Echos.

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important aspect

– Second world operator of telecom satellites created in 1977, with a market share of 16%;

– a turnover of 1.28 billion euros generated by 39 satellites, 61% divided between video, professional data and video for 14%, public services for 12%, mobile connections for 7% and fixed broadband for 6%;

– International diversity between Europe (26%), North Africa and Middle East (22%), America (10%), Sub-Saharan Africa (10%), Central Europe (9%);

– Business model based on free self-financing generation through 10 to 15 year contracts – the lifetime of a satellite – and return to growth through video and connectivity;

– 19.8% by Capital BPIFrance, 7.5% by Strategic Investment Fund and 6.7% by China Investment Capital, Dominique d’Hinnin chairs the 11-member board of directors and Eva Bernek is the new CEO;

– Good financial position with €474 million in cash from free cash flow to €1 billion in cash (debt leverage reduced to 3.05).

the challenge

– Strategy between now and 2025: acceleration of growth in video (ViaSat and ramp up of broadband with high definition) and connectivity;

– Integration of innovation strategy with business model;

– Structural environmental strategies in the management of the space fleet within the framework of the Net Zero Space initiative – avoiding congestion, managing space debris and reducing the impact of the end of life of satellites – and optimization of impact ground operations;

– ELO and IoT first, implementation of IoT strategy with turnkey services in geostationary fleet;

– the successful launch of Quantum in November 2021 and a capital increase of 22.9% in Oneweb-constellation in low orbit;

– Activity visibility with an order book of 4 billion euros: entry into service of 4 satellites in 2023 (Eutelsat 10B, Eutelsat Hotbird 13G and 13F, Connect VHTS) and 1 in 2024 (Eutelsat 36D).

the challenge

– Exposure to connected TV projects from Google/Qualcomm and competition from Tesla;

– launch delays due to logistical disruptions;

– Impact of the Russian-Ukrainian conflict (6.3% of revenue from Russian customers, rental of 4 satellites from Russian RSCC, for a net price of 322 million euros): 6 launches planned for OneWeb from Baikonur delivered to SpaceX and broadcast by New Space India and Russia Today to suspend;

– maintenance of investments of €400 million per year until 2024;

– 2021-2022 objectives, confirmed after revenue down 3.5% in first nine months of financial year, revenue of €1.1 to €1.3 billion, free cash flow of €400 to €430 million and cost savings of €20 to €25 million, Connect VHTS and a return to revenue growth in 2023-24 due to delays in entry into service of Eutelsat 10B;

– Dividend of €0.93 for 2020-2021.

French players are well positioned in audiovisual production

Among the independent players, the French Banijoy is the world leader with an expected turnover of 3 billion euros in 2022 in a market representing 100 billion in revenue. MediaOne (backed by KKR funds), with a turnover of 1 billion euros, is the other major French player in the sector. The market is still very fragmented as, according to the European Audiovisual Observatory, the top twenty production groups accounted for only 38% of titles produced in 2020. However, experts believe that the sector has entered a stage of consolidation. Thus Banija’s stock market listing aims to enable better participation in this movement.

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