I like you have bought into this share today, the second lot bought within a month, I'm putting a lot of faith in onboard internet, for aircraft and with the new satellites due soon seems an obvious choice for the future, but a hold at present regards
Rather stating the obvious, I guess the choice would be either a competitor or an organisation in a closely related field looking to expand into areas where ISAT have expertise and are successful.
There are some US contenders - Iridium comes to mind - but maybe Chinese and/or European interests would challenge potential US dominance in this very strategic niche. Hostile bids can be made at any price - I think the average premium is around 30% to 40% but I recall that Kraft's failed attempt at Unilever was at only 18%.
The Jefferies analysis, posted here by Blackprince on Monday, postulated an imagined Echostar bid of £10 at +30% above an ISAT sp of £7.70, (ISAT was around this level until early September, of course).
On that basis a credible but optimistic bid today might conceivably start as low as 520p - although I think it would be fanciful to suppose that it would be successful. On Tuesday I suggested that controlling shareholders would not countenance a bid below the mid price enjoyed until September, say around £7.50. I'm sure many would still regard that as cheap (such as Jefferies analysts presumably) but then the market obviously doesn't rate ISAT too highly at the moment.
Personally, I don't think there'll be a bid - it's just the 'go-to' thing when an sp falls to a supposedly cheap level.
Well, perhaps it hasn't worked out quite so well for Ripley after all - or for me at the moment, come to that. The market may have been indecisive at first but has made up for it now.
The price certainly did get driven below my warning line at 420 and now it's well into the free fall zone. Am I buying? No fear! I've seen this happen elsewhere a few times and, although I'm likely to buy at some point, I'll wait for this one to fully succumb to gravity: I'd much rather accumulate something in stages on the way up - keeping my average sp below current than do the reverse.
Whilst it might logically hold around here (380), if anyone has a credible chart theory about where it might next find genuine support I'd be interested -there's obviously some fragile previous form at 360 and 300 but anything down to around 275 looks feasible to me now.
Regarding 'take-over' scenarios - I rather regret hinting at that old Jefferies story in a post last week. It's the sort of straw we do tend to grasp when the market turns against one of our pet investments. There's an obvious flaw in supposing that the low sp makes a difference isn't there? - Jefferies thought that EchoStar might bid £10-£15, and rationalises that this represents some sort of fair t/o value. If that is truly the case then such an offer is hardly dependent on whether the current market sp is £5 or £3.80 . Yes, a bid might come in, maybe up to 2x current - say £7.60. That's hardly what many holders of the last four years might have hoped, although it would do me handsomely. At one time I thought it might have made a suitable BT acquisition - in the days when BT had a bit more oomph and a bit less baggage.
In the meantime, it rather looks like there's going to be plenty of time to sus this one out as it doesn't seem set to recover for a while. Maybe it'll level off when the yield is back up to 5% and more appropriate to the apparently perceived risks? It's already up to about 3.75% I think, another quid off might do it on that basis.
The article below is only 4 months old, so with the huge (unjustified IMO) reduction in the share price since, surely a bid is inevitable? Views welcomed as always, even if I disagree with them!
"Satellite operator EchoStar, controlled by Charlie Ergen, is sitting on a cash pile of a huge $2.8 billion (2.36bn), plus another $500 million of marketable securities, and is currently not doing anything with this war chest.
Equity analysts at investment bank Jefferies have carried out a study to examine whether a hypothetical bid for Inmarsat might now make sense. Helping their rationale is a fall in Inmarsats share price which the bank says now outweighs the evident dis-synergies and clunking industrial logic of a bid from EchoStar. The earnings penalty from holding so much cash must now also be unbearable for EchoStar shareholders.
We believe there is merit in doing the merger analysis. We conclude that a £10 per share offer balances all interests (though we estimate EchoStar could bid as high as £15 and still see year 3 Free Cash Flow per share accretion pre-synergies). Our analysis suggests the urge to finally pull the trigger on an offer must be becoming overwhelming.
The bank stresses that its discussion is hypothetical and is not based on non-public information / confirmation from the issuer or another party, and does not otherwise reference an impermissible rumour.
The bank adds that it could see EchoStar paying up to a 30 per cent premium for Inmarsat, or even more in order to secure the business."
It seems that any company who wants to invest in it's future and not shell out everything to impatient shareholders is going to get hammered share price wise. The commitment to invest in onboard wifi - brilliant! Millennials cant be without their phones for two seconds and they're the next generation of flyers. We'll look back in a few years and think 'wasn't it funny those days when you couldn't use your phone onboard'. It will be one of those things that one day will be the norm even if it is slow/expensive now. For me it's a buy in and be patient stock. Plus there might even be a boost if the US payment does actually materialise. Or even a takeover at these levels. Sit tight!
Today's chart action says it all really: with the open and close prices very close compared to the day's high and low, the market seems somewhat undecided but, on balance, hasn't judged the situation any worse than it did in February, when there was a lot less clarity. There doesn't seem to be much inclination currently to drive the price below 420, which makes sense given that the divi policy looks to be sensibly reset (subject to approval) and the business strategy and opportunities have been spelled out. Not a good day sp-wise (unless you are Ripley) but I guess it could have been worse.
Maybe, but the sp seems to suffer largely in big chunks rather than on day by day accumulations. I do think the volatility of price over the last few years has much to do with the company's financial foresight and management of shareholder expectations.
I'd agree about sub £4 if it fails to stay above £4.20. Depending on your view of the long term prospects, it could be tempting to think that it's becoming a serious take-over/ buy-out target.
So, subject to my maths, the yield has been 'adjusted ' to about 3.25% at today's price?
Yes, given where the business is right now, it does seem to be the right move, albeit a bit late. I wonder that they didn't foresee the position and handle it better. The interim now looks inappropriate doesn't it? which implies a lack of foresight and poor management to me.
I was a bit perplexed by the recent roller coaster, and the big fall. I emailed IR and got this reply on 13th February 2018.
Unfortunately, we have particularly high level of short interest in our stock (current around 6% vs a market average of 3.5%). This level of short interest, combined with the lack of liquidity in our stock, means that any negative noise / news / sentiment has an exaggerated impact on the share price. Today, HSBC published a very short, but negative, note on us (albeit just re-hashing old news and ideas). In the absence of any positive notes, this research seems to have driven the negative share price movement today, which is particularly severe, given that HSBC did not change their recommendation on us.
We cannot comment on current trading but it is fair to say that the outlook for the business remains positive and we are well positioned to be able to access future growth opportunities.
We will give more information at our 2017 results on 9 March
Decent and polite reply, within the limits of what they can say, which I found encouraging but as always DYOR
Also to bear in mind that with massive increase of satellite count -needed to provide a service comparable to dsl to large number of customers- in low earth orbit, the risk of creating a layer of space rubbish would increase. To my mind there will be regulatory discussions that will be the single biggest hurdle to this model... and the affordability for end users will remain an issue...
There's certainly a lot of activity in low earth orbit at the moment but it's not like Inmarsat are unaware of it. Honestly, I do think this is the biggest threat to the company but not immediately so. There are huge technical challenges to getting it working and then further huge technical challenges to getting it working globally with no gaps which is what you need for long haul flight coverage.
SAS says it is going for the gap in the market between existing satellite communications operators, such as Iridium, Inmarsat and Globalstar, and land-based mobile networks such as Vodafone, Telefonica, Airtel and Safaricom.
It is targeting customers earning less than $8 a day.
This is a market if voice and text that is not what Inmarsat targets. Inmarsat makes money on maritime and soon aviation. This address voice and text for the low income underserved areas...a risky low margin biz.
interesting... this will create a case for fair competition tribunals... can space X subsidise a satellite business of its own by charging the cost of sending its own satellites by charging competitors...
Doubt's about ISAT?
OK, Let's start taking bets on data connectivity not being essential or even desirable for global transport operators and customers, remote locations etc. in future...... who's 'in' ?
at some point the capex challenge will go away and we will have tons of cash coming in... unless the service does not pick up of course but the pricing I see on BA seems reasonable for most pockets to take a dip and enjoy some in flight connectivity... also we do not know the revenue model but it may be we have a guaranteed income from airlines while airlines take the risk, or revenue sharing arrangements or a mix thereof... I mean being outright negative now is probably a mistake. what will matter is some visibility on future revenues that should come with a future guidance for e.g. 2019 2018 is already known to be incremental with a 1.5 B high end... and 1300 low end... let us see what happens....
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