Inmarsat gains as Deutsche Bank starts stock at 'buy'

Inmarsat got a boost as Deutsche Bank initiated coverage of the stock at ‘buy’ with a 1,030p price target.

“We acknowledge that the ISAT thesis centres on the concept of inflight communication gaining real traction and at present there are mixed views, but we see scope for ISAT unlocking value given the size of the market.

“We have carried out bottom-up analysis of the market potential for in-flight communication and about 40% of our target relates to the European aviation opportunity. Given ISAT has underperformed the Telco sector by 16% year-to-date, we see current levels as a good entry to gain exposure to strong growth.”

DB noted that Inmarsat has underperformed the telco sector by 16% year-to-date, so at current levels it represents a good entry point to gain exposure to strong growth, with an attractive 6.1% dividend yield.

The bank argued that the big driver for Inmarsat is the in-flight opportunity, both Global Xpress and the European network, although this is also where uncertainty lies.

DB said it was 2% below consensus in terms of group earnings before interest, taxes, depreciation and amortisation in 2017/18, adding that it is comfortable with its position given the in-flight opex ramp-up.

“Consensus has progressively moved down in recent months and we think we are towards the end of the earnings downgrade cycle. Furthermore we think that investors recognise the ‘over-optimism’ from some of our sell side peers.”

At 1153 GMT, the shares were up 4.4% to 732p.