Inmarsat boosted by Macquarie upgrade

Satellite communications company Inmarsat got a boost on Thursday as Macquarie upgraded the stock to ‘outperform’ from 'neutral' and gave it a target price of 850p, saying it may at an inflection point.

Macquarie said it can no longer ignore a potential takeout scenario given the strategic value of Inmarsat’s global Ka/L-band footprint, access to niche markets generating above-peer 5%+ 3-year compound annual growth rate and sizeable spectrum holdings.

In addition, it pointed out that the shares are trading at a 10% discount to peers or 7x 2018 earnings before interest, taxes, depreciation and amortisation, which it reckons is enough to warrant a second look.

The bank also argued that while a guidance downgrade is likely on the 4Q16 call, consensus estimates for 2018 revenues are already below management’s long-term outlook, which looks baked into the price.

“4Q16 results will likely confirm what investors already suspected for a long time: the 2018 guidance issued in early 2016 is untenable amid delays in airline orders, regulatory approvals and sub mix headwinds in its bread and butter segment, Maritime.

“However, this may be more of a formality - consensus revenue expectations for 2018 have approached our $1.38bn estimate versus management’s $1.45-1.60bn outlook.”

At 0915 GMT, the shares were up 3.6% to 664.83p.