SES gets Top 20 pick

Satellite operator SES has been selected by investment bankers Morgan Stanley as one of its "20 Stocks for 2012". The bankers forecast that profitability growth at SES "should outstrip growth in revenues, a result of operating leverage and the elimination of losses at start-up services businesses, which we believe should be significant profit generators by 2012".

"The company has a fleet of 38 satellites in 25 orbital locations, and delivers mission critical, highly cost-effective bandwidth to broadcasters and telcos globally," says the bank. "Despite the difficult economic climate, the company is guiding for 2008-2010 compound annual revenue growth of "above 5%". This growth is based on several drivers. In broadcasting, the number of channels continues to increase, and the switch to high definition requires three to four times the bandwidth of standard digital. In data, demand is growing for Internet services for rural areas not covered by ADSL or cable. SES (and competitor Eutelsat) provide raw capacity and white label end-to-end service. SES is also expanding into higher-growth emerging markets."

"Strong profit growth," says the report, "combined with capital expenditure (which is both highly visible and increasingly efficient, as the Fixed Satellite Services industry benefits from a "Moore's Law" effect on the capital cost of satellite capacity) means that SES should continue to generate substantial excess cash flow. The company has committed to increase its annual dividend by a minimum of 10% annually, and has a solid track record of cash return via share buybacks."