Speedcast International Limited

SDA Details

Appointment of Two New Members in the Board: Speedcast International Limited (ASX: SDA) is the world’s leading provider of remote communications and IT services. The market capitalisation of the company stood at A$ 255.32 million as on 27^th September 2019.

Speedcast International Limited has appointed Peter Shaper and Joe Spytek as Independent Non-Executive Directors in the Board. Peter Shaper is a Partner of Houston-based private equity firm, Genesis Park and has an extensive business and Board experience particularly in the satellite telecommunications sector. Joe Spytek has more than 25 years of experience in leadership and international business.

Ratings Update: S&P Global has lowered its issuer credit rating from B+ to B and placed its rating on CreditWatch negative. Moody’s has also lowered its issuer credit rating to B2 from B1 and have retained its negative ratings outlook. These agencies have lowered its rating because of the company’s recently announced results for six months ended June 30, 2019 (or H1 2019) and due to the board and management changes.

H1 2019 Financial Results Highlights: The company reported a revenue of $357.6 million, up by 17.3% on a YoY basis. Statutory NPAT loss came in at $175.5 million which included a small positive impact due to AASB 16 and negative impact of $154.8 million from the impairment of goodwill relating to the performance of the non-government operating segment. The company generated an operating cash flow of $23.9 million with cash conversion of 36% of underlying EBITDA (H1 2018: 89%).

The company’s net debt increased to $625 million at 30 June 2019 due to non-recurring acquisition and Globecomm integration costs, negative working capital and payment of the final 2018 dividend.The company is targeting to keep the leverage ratio below the level of 4.0x at the end of 2019.

Segmental Performance for H1 2019: Maritime division reported a revenue of $119.3 million up by 12% YoY driven by the contribution from Globecomm. Excluding Globecomm, Maritime total revenue was down 1.7% to $104.7 million while within this Service revenue was up 3.1% to $97.0 million. Enterprise and Emerging Markets reported a revenue of $79.6 million up by 6.8% YoY due to the increased contribution from Globecomm. Excluding Globecomm, Enterprise and Emerging Markets’ revenue was down 21.4% to $58.6 million, mainly due to the phasing of the nbn project.

Government division reported a revenue of $80.4 million, up by 69.3% YoY driven by the contribution from Globecomm, with underlying organic revenue flat.However, new customer programs are expected to drive growth in services revenue once the implementation cycle is complete in H2 2019. In the Energy segment, total revenue was up by 2.6% YoY to $78.3 million mainly due to the contribution from Globecomm, with underlying organic revenue up 0.2%.
 

 Segmental Performance (Source: Company Reports)

Outlook for Full Year FY19: The company reaffirmed its previous guidance for EBITDA in the range of $150 million to $160 million for FY19.The company is expecting a cost savings of $10 million in H2, equating $20 million of annualised savings and is targeting a capex of $50 million for whole year.

Stock Performance:On the stock’s performance front, it produced returns of 10.18% and -62.95% in the last one month and three months, respectively. Currently, the stock is trading below the average of 52 weeks high and low, thus, indicating a decent opportunity for accumulation. Hence, in view of aforesaid parameters, decent outlook and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$1.245 per share (up 16.901% on 27th September 2019).


SDA Daily Technical Chart (Source: Thomson Reuters)

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