Inmarsat shares have taken off after the successful launch of its second Global Xpress satellite on Sunday.
There had been delays after problems elsewhere with the Russian Proton rocket used for the launch, but the success now means the satellite communications specialist is on track to meet its strategy. Chief executive Rupert Pearce said:
The successful launch....is a significant step forward on our journey to deliver the world’s first globally available, high speed mobile broadband service. Our first GX satellite entered commercial service in July 2014 [and] with Inmarsat-5 F3 expected for launch by Proton in the coming months, we are on schedule to achieve full global coverage early in the second half of 2015.
The news has lifted its shares up 13p or 1.5% at 847p. Berenberg issued a hold note, with analyst Robert Berg saying:
The second Global Xpress satellite has been successfully launched by ILS aboard a Proton rocket, which given Proton’s recent record can best be described as providing a near-term sigh of relief. Over the coming weeks, Inmarsat will perform a series of manoeuvres to move the satellite into its correct orbit, to be completed by the end of March...The third satellite, which will complete the constellation, is due to be launched before the end of the first half of 2015, with the commencement of global operations set for early second half 2015.
Given that there are still some satellites in the queue before the next Global Xpress launch, we believe that material risks remain...Thus an early second half 2015 start to global operations still relies on perfect execution from the Proton launcher, and based on historical precedent we would not want to bet on this. We acknowledge that Global Xpress is a 15-year project, so delays are not that meaningful to the programme net present value. However, with risks still remaining, we think there is still some threat to near-term consensus Global Xpress revenues, and we would be reluctant to argue at this stage that there is no risk of further downgrades.
Given the strength of the US dollar, the sterling-priced Inmarsat shares have performed extremely well in recent weeks...Medium-term growth prospects from Global Xpress remain attractive, but current expectations are high. Even with perfect execution from Proton, we expect little evidence until end-2015 at the earliest that Inmarsat can grow into its high multiples. Upside from a LightSquared deal remains, but visibility is extremely low. We maintain our hold rating and our discounted cash flow-based price target of 800p.
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