Analysts reckon satellites operator Inmarsat (ISAT) could nearly double in value to £13.50, citing numerous catalysts to drive a re-rating. Chief among its opportunities are the ongoing Global Xpress satellites launch schedule and a new Air-to-Ground (ATG) venture that will allow aeroplane passengers superfast internet access in the air.
‘We see Inmarsat as profoundly boosting its multi-year earnings upgrade cycle,’ say analysts at investment bank Jefferies, after analysing in-flight internet supplier Gogo (GOGO:NDQ). ‘We’d highlight that, on the most conservative of assumptions, Inmarsat’s long-run European gross passenger opportunity could be over 300 million annually,’ calculates Jefferies. ‘At only a 35% take rate and €8.00 per session, we estimate $1.2 billion of retail revenue.’ The analysis estimates as much as 55% of that revenue could end up in Inmarsat’s pocket as the wholesaler supplier.
Investors must consider the execution risks and the delicate satellite launch process, either of which could delay projects and delay forecast revenues. The company has successfully launched its first Global Xpress satellite (F1), but delays cannot be ruled out for the subsequent F2 and F3 launches.
Inmarsat shares have struggled to make much headway over the past 12 months. At 754p, they are almost exactly where they started the year, partly due to ongoing difficulties in clawing back payments from former US partnership LightSquared.