Inmarsat Share Discussion Threads

[whipround] 27/6/2005 14:53

Lots of buy recommendations and not too much reliance on oil for satellites.

[targatarga] 27/6/2005 14:40

mart - possibly the announcement. regards

[martingb] 27/6/2005 13:51

An impressive move upwards on minimal volume - any idea why?

[whipround] 27/6/2005 13:05

And Monday - Telenor increasing it's stake to 10%

[ygor705] 25/6/2005 16:25

Nice upturn late on Friday!

[sealed] 23/6/2005 06:49

Daily Telegraph
Questor Column

Heading for the stratosphere?

"Alone, alone, all, all alone,/Alone on a wide wide sea!/And never a saint took pity on/My soul in agony."

Satellite communication is what Coleridge's ancient mariner needed to spare him his solitary torment. Just like Dame Ellen MacArthur.

Unfortunately for the 18th Century seaman, Inmarsat was only established 26 years ago. Created by the International Maritime Organisation to provide communications at sea, it is now the dominant provider with 10 "geostationary" satellites bouncing around tearful pictures of Dame Ellen as well as information for the Red Cross and Oxfam.

Inmarsat itself is far from lonely. Its float on the stock market this week was so popular the shares were 10 times oversubscribed. Conditional dealings started at the top of the indicative 215p-245p range and quickly leapt to 285p. Yesterday - the first day of unconditional trading - they closed at 280p.

The obvious attraction is the dividend. The company has pledged to return $117m (£65m) to shareholders this year, which equates to a yield of about 5.5pc.

At the same time, Inmarsat promises reasonable growth from its current $460m of revenues. Government use of communication satellites is expected to roughly double to $1.1billion by 2008, and airlines are introducing broadband internet access for passengers.

Costs are also relatively low once the satellites are launched. One is scheduled for this year, which would take capital expenditure to $140m. After that, it will be just $20m. Inmarsat should then generate roughly $250m a year for dividends and debt repayment.

Of course, there are launch risks and in another 15 years debts will have to be increased from the approximate post-float $850m to pay for a new set of satellites.

But until then, it will throw off cash and pay out half its earnings in dividends. Don't expect rapid growth but there is certainly no albatross round this stock's neck. Buy.

[ygor705] 22/6/2005 16:26

Bought in today at 280p. This has always been a quality operation and with a yield of over 4% more than twice covered it has to be a core holding for any sensible Fund Manager of Income Funds. Nevertheless, may take a bit of time to get noticed by the wider market.

[whipround] 22/6/2005 13:02

Seems like a good solid company, I've bought a few, seems to have damned by faint praise above though.

[rambutan2] 22/6/2005 12:29

worth noting that no big capital expenditure expected before 2013 or so.

[m4m] 22/6/2005 12:23

Inmarsat - Speculative buy on
listing today
Says Monisha Varadan, editor of Allnewissues.com

Background: London's biggest float has started trading this morning. Well, the biggest float until Party Gaming hits the market anyway. Inmarsat, the satellite communications company located just around the corner from the Hoxton based offices of t1ps.com launched trading on the LSE today. The IPO priced at 245p was received well on Friday, when the shares began trading in the grey market. Investors appetite for new issues has been fairly mixed over the six month period, but Inmarsat saw its shares jump a sharp 18% closing at just over 280p last week. This means nothing to the private investor at the moment, apart from the fact that LSE might be welcoming a quality new issue. At 280p, the shares are valued at 1.28 billion pounds.

Operations: Inmarsat has been hitting the headlines for all sorts of reasons. It has managed to raise a hefty sum of money at the IPO stage; 354 million pounds, it is one of the world's leading geostationary satellite companies looking to go public, investors have been offered half of earnings, nearly $75 million in a payout for the year 2005, which translates into a yield of around 5% (based on $117 million for the full year) and of course, it marks the entry of yet another company onto the main market, a rare occurrence given the flood of IPOs onto AIM. On its official company website, the management has claimed that the stock could enter the FTSE 250 when the list is reviewed this September.

It takes a while to understand how the company actually makes its money, especially when investors are confronted with large numbers like revenues of $473 million and operating profits of $159.3 million. The business operates a host of geostationary satellites to all parts of the world except the poles, more recently providing its services to the Tsunami struck areas. The business hooks up ships, planes and on land transport through its satellite services and provides internet, fax and mobile communication access. The clients vary across a gamut of industries, from ship owners, managers, TV broadcasters, international aid workers, national governments, banks and financial institutions. While Inmarsat provides the satellite airtime, over 80 network partners market the service across the world. And this entire complicated network of signals is controlled from its London offices.

The company was formed initially as an inter governmental organisation (IGO) in 1979 to provide global safety and other maritime communications, it started with a customer base of over 900 ships in the early eighties and grew rapidly until it was the first IGO to go private in 1999. In 2003, Apax and Permira bought controlling stakes in the equity and in the recent fundraising have been diluted down to a combined 33% of the company. Telenor ASA owns 9.3% of the company, which management control 6.5% and Lockheed Martin will hold 8.6% of the listed entity.

Inmarsat is not new to a public life, its loan stock was listed on the Luxembourg Stock Exchange. It has come to the market, primarily to pay down half of its 800 million pound debt. Without raising the 354 million pounds at the pre-IPO stage, the balance sheet would be of concern to any investor. Not just because of a high level of debts, but because of the steep interest costs the company had to pay on its borrowings - $167.5 million in the year to December 2004. The first quarter to March has begun well with revenues increasing by 7.7% to $127.4 million. With debt levels down, cash interest costs should be substantially reduced to around $40 million and analysts are looking for a forward price earnings ratio of over 10. The company issued a third of its equity in the fundraising and an additional 10% will be provided by secondary sales as an over allotment to satisfy investor's appetite.

Business Development: Future earnings growth is dependent on Inmarsat I - 4 satellites, a new generation high powered satellite which kicked off services on 11 March 2005. This is apparently, the backbone of Inmarsat's planned Broadband Global Area Network which will offer up to 492kbps of internet access, mobile multimedia and other advanced applications. The group splits its services across three divisions - Inmarsat which provides global mobile satellite communications, Invsat Limited which supplies telecommunications systems integration services and Rydex, which provides maritime email solutions. One of the more exciting projects is its status as 'consortium member' on the European satellite project, Gallileo. Gallileo is a new advanced satellite navigation system across Europe which is expected to begin in 2008.

Management: The board of directors is led by Andrew Sukawaty, as CEO and Chairman. He also sits on the board of O2 as non-exec director and serves as non-exec director of Powerwave Technologies. Rick Medlock, Exec Director and CFO was previously CFO of NDS Group listed on NASDAQ and Euronext. Michael Butler, COO, has worked with 3M, MFS Communications before it got taken over by WorldCom and Inmarsat Global Limited. The five non-exec directors on the board are Stephen Davidson, James Ellis Jr, Sir Bryan Carsberg, Bjarne Aamodt and John Rennocks.

Investment Conclusion: As a fellow journalist rightly commented, 'Inmarsat is probably not the best thing since sliced bread, but it is a decent company being sold at an attractive price.' While it needs to constantly fund its expansion projects, there is a niche for Inmarsat's services and its status as global leader, certainly benefits its case. The segment maybe be small and growth potential limited, but if Inmarsat can demonstrate that its new projects can bring the money in, shares might start looking attractive. Fund manager Charles Luke from Aberdeen Asset Management views the cash flow as attractive and believes that there is opportunity for growth in data revenues. The 5% yield is certainly one that attracts us. The potential take up of the European Satellite Navigation system could be huge. With interests costs reduced substantially, earnings will improve and the shares could plausibly trade on a mid teens PE. At 245p the shares look like a speculative buy.

Contact Details : Simon Ailes - Investor Relations - 0207-728 1518

[tompeck] 22/6/2005 12:12

Mike - I agree, though I think the growth story might be better than envisaged. Plenty of spare capacity on the new satellites.

[mike crowsoft] 22/6/2005 10:34

I managed to get some of these in the float, which is nice, and fully intend to tuck them away for a few years, taking in the dividends, and watching it grow.

I don't expect it to be particularly exciting, but the list of bookrunners and shareholders suggests to ne that this will become a big funds core holding.

[sealed] 21/6/2005 06:36

Inmarsat sends out right signals with flotation price

IT USED to be that shares in most floating companies bounced to a premium in the early days of stock market trading. That tradition eased investors' concerns about risk, as well as leaving companies with a good chance of enjoying the first weeks and months of public life without having to explain a southward-moving share price. Thanks to the greed of vendors, and their merchant bank advisers, investors can no longer assume that shares in newly listed companies will get off to a decent start.

However, Inmarsat, the satellite communications company whose shares will start unconditional trading on Wednesday, is either reverting to the old ways or bucking the more fashionable current trend. Promoters of the issue suggested that investors might buy the stock at between 215p and 245p. Demand for shares was so strong that they could be priced at the top of the range. The conditional, or grey, market price has leapt 15 per cent above the 245p listing price and it will be at something adjacent to 280p that investors can expect dealings proper to open tomorrow. Yet the Inmarsat people have priced the float such that investors can still buy the stock eagerly, and with some confidence.

Inmarsat is not the best thing since sliced bread. But it is a decent company being sold at an attractive price. Yes, it periodically needs to find big lumps of cash to put satellites into the sky. And yes, those satellites might break down. At the same time, there is a copious supply of satellite capacity and while Inmarsat is protected from this threat because it serves a well- defined segment of the market, this brings difficulty as well as hope. Inmarsat is different from other satellite operators because it takes communications signals from transmitters that move around the surface of the globe such as those on boats or planes. Yes, this discrete market may protect Inmarsat from competition, but it is a smallish segment with correspondingly limited growth potential.

However, as long as Inmarsat can grind out some sort of growth, and the likelihood is that it can, the shares are certainly worth buying at any price up to 300p. A price of 350p would leave the stock paying a perfectly attractive 4 per cent dividend yield that is adequately covered twice by post-tax earnings per share. Get involved.

[ygor705] 20/6/2005 17:54

Any idea of where I can pull down a copy of the prospectus from the Net? What is the yield likely to be?

[rambutan2] 19/6/2005 16:53

svg capital has been a great hold for me over the years, worth noting that permira not sold any in float. which imho a big hint of good things to come.

[mike crowsoft] 18/6/2005 09:23

News and details to follow...